S'pore downgrades GDP forecast to 0%-2% as US-China tariff war weighs on global growth

The Ministry of Trade and Industry (MTI) cut Singapore's growth forecast for 2025 to "0.0 to 2.0 per cent" on concerns that the US-China tariff war could induce a global economic slowdown.

This is a downgrade from the 1 per cent and 3 per cent range previously.

"MTI's assessment is that the external demand outlook for Singapore for the rest of the year has weakened significantly. This has led to a deterioration in the outlook of outward-oriented sectors in Singapore. In particular, the manufacturing sector is likely to be negatively affected by weaker global demand," MTI said on April 14.

This, alongside softening global trade, will also weigh on the growth of the wholesale trade sector. The pullback in global trade will similarly dampen the growth of the transportation & storage sector through its drag on demand for shipping and air cargo services, it said.

At the same time, the finance and insurance sector could see weaker trading activity due to risk-off sentiments that will adversely affect the net fees and commission incomes of the banking, fund management, forex and security dealing segments.

In addition, the uncertain economic backdrop will likely dampen firms' capital investment spending and constrain credit intermediation activity. Furthermore, the growth of payments firms could moderate in tandem with tepid business activity and lower consumer spending, MTI said.

Taking these factors as well as the performance of the Singapore economy in the first quarter into account, MTI has decided to downgrade Singapore's GDP growth forecast for 2025 to "0.0 to 2.0 per cent".

MTI said it will continue to closely monitor global and domestic developments, and make further adjustments to the forecast if necessary.

The Singapore economy grew by 3.8 per cent on a year-on-year basis in the first quarter of 2025. This was slower than the market expectations.

Bloomberg's consensus estimate was for a 4.7 per cent year-on-year growth and a 0.3 per cent contraction on a quarter on quarter basis as of April 8.

In his ministerial statement on US tariffs on April 8, Prime Minister and Minister for Finance Lawrence Wong said Singapore may or may not go into recession this year, but its growth will be significantly impacted.

In the near term, global growth is expected to be weaker, which means external demand for Singapore's goods and services will fall, he pointed out.

Outward-oriented sectors - like manufacturing, wholesale trade and transport - will bear the brunt of the impact.

On April 2, US President Donald Trump announced a suite of universal tariffs, including a 10 per cent duty on Singapore.

The measures were supposed to kick in on April 9, but Trump announced a 90-day pause on the additional tariffs.

Most countries now face a 10 per cent tariff on their exports to the US, with the exception of China which currently faces a 145 per cent tariff.

In turn, China raised its tariffs on American goods to 125 per cent - effective April 12 - as it retaliated for the third time in the escalating trade war between the two superpowers.

The Trump administration later excluded electronics such as smartphones and laptops from the reciprocal tariffs, which means they will not be subject to the 145 per cent rate levied on China.

But hours later, it played down the exemptions, saying they are included in the semiconductor tariffs, which face a separate round of import tax.

"So much for clarity, Wall Street will likely walk into Monday confused, jittery, and ready to hit the sell button on any sign of renewed tech fragility," said Mr Stephen Innes, managing partner at SPI Asset Management on April 14.

"The "deal optimism bounce" might show up in premarket, but it's built on sand and headlines like this make it tough for investors to find footing," warned Mr Innes before markets opened on April 14.