S’pore retains lowest-tariff edge in Asia even as US court ruling narrows the gap
Source: Straits Times
SINGAPORE – Most Asian economies stand to gain at least temporary relief after a court ruling axed a major chunk of US President Donald Trump’s tariff regime.
But the US administration’s quick move to impose a new global tariff rate of 15 per cent after the US Supreme Court ruling means that Singapore goods will now face higher tariffs.
However, Singapore goods imported by the US remain the lowest-tariffed in the region in terms of trade-weighted tariff rate, which measures the average tariff a country imposes on its imports, weighted by the value of those imports.
Mr Chetan Ahya, chief Asia economist at Morgan Stanley, said that at 15 per cent, the weighted average tariff rate on US imports from Asia will fall to 17 per cent, from 20 per cent.
Tariffs on China – the world’s biggest exporter and the region’s largest economy – will decline to 24 per cent from 32 per cent.
Within the rest of Asia, tariff reductions range from unchanged to a drop of 1 per cent to 3 per cent in trade-weighted rates.
“By contrast, Singapore and Australia would face modest tariff increases of 2 per cent to 4 per cent, respectively, as they were previously subject to the 10 per cent baseline reciprocal tariff rate,” he said.
Among Singapore’s immediate neighbours, Indonesia will see the biggest decline, followed by Vietnam, Thailand, the Philippines and Malaysia.
While the gap has narrowed, Singapore still enjoys a trade-weighted tariff of 6 per cent, lower than Indonesia’s 19 per cent, Vietnam’s 15 per cent and Malaysia’s 10 per cent.
Most analysts also believe that any tariff relief is most likely to be fleeting. And any uptick in the regional trade cycle, due to lower rates as long as they last, would by extension support trade-oriented economies like Singapore.
Tariff exemptions for semiconductors and pharmaceuticals – two major Singapore exports – also mean that the Republic’s ability to attract investments in cutting-edge sectors, including artificial intelligence, remains undiminished.
Mr Chua Hak Bin, regional co-head of macro research at Maybank, said Singapore’s $8.5 billion fiscal surplus, projected in Budget 2026, may be helpful if needed.
“The Government’s large fiscal surplus position leaves ample dry powder to draw upon in the event of any negative impact from Trump’s tariff threats or in the event of any unexpected shock or downturn,” he said.
However, what is likely to hurt every economy, including Singapore’s, will be the uncertainty around how the US would resurrect the tariff regime back to where it was before the court decided that the International Emergency Economic Powers Act (IEEPA) does not grant Mr Trump the authority to impose tariffs without congressional approval.
While not all tariffs fall under IEEPA, analysts believe most of them do – including the 10 per cent baseline tariff Singapore was subject to.
In an immediate response, the White House issued a new executive order using Section 122 of the Trade Act to impose the global 10 per cent tariffs from Feb 24. Mr Trump on Feb 21 announced in a Truth Social post that the tariff rate would be raised to 15 per cent.
The statute, which has never been used before, allows for temporary tariffs for only 150 days and requires Congress to extend it thereafter. It is unclear if the White House can extend Section 122 for another 150 days on its own with a new executive order.
The US trade and commerce officials have indicated that the lost IEEPA tariffs can be replaced by using Section 232 of the Trade Expansion Act, which concerns national security threats, and Section 301 of the Trade Act for unfair trade practices – both already cover some products imported by the US.
However, analysts believe that after the Supreme Court’s decision – which categorically puts tariffs as the preserve of the legislative branch – the Trump administration will struggle to justify more durable legal authority to reimpose the duties.
Dr Deborah Elms, head of trade policy at Singapore-based think-tank Hinrich Foundation, believes that as Mr Trump remains committed to the invocation of some variation of national emergency to entrench a wide-ranging tariff wall, the trade chaos will continue.
“The global trade community had been hoping for greater clarity in the wake of a Supreme Court ruling. Unfortunately, it isn’t getting any,” she said.
Dr Elms noted that while the court decision provides some certainty about what constitutes a national emergency, it does not remove much of the uncertainty that is a hallmark of Mr Trump’s trade policy and tariff threats.
“The President’s doubling down on his trade policy may, in fact, result in new risks for American businesses and US trade partners,” she said.
Mr Brian Levitt, chief global market strategist at US asset management firm Invesco, said overall US tariff levels are unlikely to decline substantially – meaning those previously enacted under the IEEPA could simply be reimposed under different legal frameworks.
“Given multiple avenues (that) can be pursued to keep tariffs in place, US tariffs appear here to stay even though their legal basis may change,” he said.
However, Mr Levitt also believes that the resilience shown by the world’s leading trading economies in 2025 means that new tariffs would not shock anyone.
“Fortunately, global economies and financial markets have already proven they can withstand multi-decade high US tariff rates,” he said.
Mr Ahya also believes it is more likely that businesses will hold the view that the peak level of uncertainty on tariffs and trade tensions has passed.
He said Morgan Stanley’s US public policy team expects Mr Trump to pursue “a lighter-touch tariff policy under the surface”, with “more exceptions, carve-outs, delays” over the medium term.
“In other words, while there may be more actions to potentially lift tariffs from here, it does appear that tariffs on Asia have likely peaked,” he said.