Government monitoring trade spat between US and China

Escalating trade tensions between China and the US have sparked concerns among the business community here over the potential impact on global growth.

The "tit-for-tat" measures announced by the two global powers are fuelling fears of a protracted trade war, which would be bad news for Singapore's small, open economy.

A Ministry of Trade and Industry (MTI) spokesman noted: "An escalating cycle of expanding tariff measures will have a negative impact on international supply chains and trade and global growth."

Singapore Business Federation chief executive Ho Meng Kit is urging companies facing difficulties with the trade dispute to contact the federation.

"When trade policies are uncertain, it is very important for our companies to know how to use our free-trade agreement network to provide them with better stability and predictability," he added.

But there is a silver lining: Some trade diversion could occur, with importers from the US and China looking to suppliers elsewhere.


If the tariff measures are implemented to the letter, regional exporters, particularly in Malaysia, Singapore and Thailand, would be well placed to benefit from the displacement of demand for certain product categories such as machinery, chemicals, aircraft parts, rubber tyres and medical equipment, said CIMB economists Michelle Chia and Lim Yee Ping in a research note.

"However, some sectors will also face disruptions in the supply chain for intermediate or capital goods that are exported directly or via other countries to China, and eventually destined for the US," they noted.

Singapore-listed commodity firms saw a knee-jerk reaction in their stock prices following the tariff announcements.

Global commodities trader Olam fell 4 per cent to $2.22 on Wednesday from Monday's close at $2.32. Agribusiness group Wilmar International's stock price also declined 4 per cent over the same period to reach $3.08 on Wednesday.

Both stocks recovered slightly yesterday.

Wilmar said it was still assessing the impact of the tariffs.