Singapore is small in population and market size and dependent on global shipping, finance, and raw material imports. We can only thrive by plugging into an open and globalised world economy. Very unfortunately, that has meant hitching on an unnerving ride on the same tiger of the globalist elites, and assimilating some ideological policies, such as environmental sustainability and open borders camouflaged in unfair FTAs such as CECA.
To get an idea of how dependent Singapore is on world trade, just look at this one metric called trade-to-GDP ratio. The five countries with the highest index, in their order, are Luxembourg, Hongkong, Djibouti, Malta, and Singapore. All these 5 are small entities having trade volume that is 3 times the size of their GDP. Based on 2023 data, Luxembourg is at 394%, Singapore is 311%. What they have in common is small physical size and dependence on open economy.
For comparison, the US index is 27% and China is 65%. This reflects the US having less dependence on trade and has a higher domestic consumption. China is more balanced, a higher dependence on trade and lower domestic consumption.
As a Price Taker in a US-China Tariff War — How Should Singapore Play?
Stay Neutral, Stay Open
As a price taker, Singapore cannot control global prices, but it can control how it positions itself as :
* a trusted hub,
* a flexible re-exporter, and
* a risk-mitigator for multinational companies caught between U.S. and China.
Singapore should pursue the following policy steps :
* Avoid taking sides — maintain strong relations with both the U.S. and China.
* Push for multilateral trade agreements (like RCEP, CPTPP) to diversify partners.
* Strengthen Position as a Hub - for world-class logistics, legal, and financial systems to offer companies a stable base as others fight tariff wars.
* Strengthen port, tech, and arbitration services.
* Boost Value-Add, Not Volume - Shift focus from mass trade to services, research, fintech, AI, and logistics orchestration.
* Price takers avoid competing on raw cost — they compete on quality and niche innovation.
* Hedge the Risks - Singapore’s role as a global port and finance hub means it sits at the mercy of global flows, even if it’s not the target. Hedging is less about "winning" — it’s about surviving volatility until the dust settles. In a tariff war, Singapore isn’t hedging against the war itself — it’s hedging against:
Hedge Currency Volatility - Tariffs disrupt trade flows, causing sharp swings in USD, RMB, SGD rates and unstable forex hits costs and profits. Tools - FX derivatives: forwards, swaps, options. Natural hedging via balanced invoicing.
Commodity Price Swings - Trade disruptions push up prices for oil, food, metals, semiconductors. Tools - Commodity futures contracts, supplier diversification.
Supply Chain Disruptions - Tariffs can reroute manufacturing and delay shipments. Singapore re-exports a lot of semi-finished goods delays = lost business. Tools -Inventory buffering, supplier diversification, flexibility in contracts.
Capital Flow Volatility - Uncertainty makes global investors pull out funds or rush into “safe havens” like USD or gold, hurting SGD stability. Tools - MAS to maintain liquidity, Portfolio diversification in sovereign wealth funds (Temasek, GIC).
Policy and Regulatory Shifts - Companies may change rules to avoid tariffs (set up front companies, reroute trade through Singapore) — this creates legal and compliance risk. Tools - Legal risk insurance, due diligence protocols, robust compliance frameworks.
In my 4 July 20220 blog on Vivian Balakrishnan's swift sanction of Russia I said it may come back to haunt Singapore.
Singapore's swift decision to impose sanctions on Russia over the Ukraine invasion could be viewed with some unease or skepticism by China, especially in the context of broader U.S.-China rivalry and tariff strategies.
China might view Singapore's actions as aligned with the West. By joining Western sanctions on Russia which is a strategic partner of China, Singapore signaled its willingness to take principled stands that align with US and European positions. China could interpret this as Singapore leaning closer to the US-led liberal order, even if Singapore asserts its neutrality.
Singapore's trust factor could be in jeopardy in any strategic dialogue. In the context of ASEAN economic cooperation, Beijing might question whether Singapore can be fully relied upon to support regional neutrality in future U.S.-China frictions. This could temper the depth of China's tariff or supply chain cooperation with Singapore, particularly in sensitive sectors like semiconductors, logistics, or high-tech services.
On the other hand, China could respect Singapore’s autonomy and pragmatism, and understand Singapore’s emphasis on rules-based international order which is a concept Beijing often contests but grudgingly respects when dealing with global trade.
Singapore is also not seen as overtly hostile to China, unlike US treaty allies like Japan or Australia. So Beijing may differentiate Singapore's actions from those of more explicitly anti-China states.
How might this influence Singapore’s future trade diplomacy posture with China?
Singapore’s principled stand to sanction Russia following the Ukraine invasion, while rooted in respect for sovereignty and international law, could shape China's perception of Singapore in ways that impact future trade diplomacy.
Perception of Alignment with the West
China may perceive Singapore as more aligned with U.S. and Western strategic interests. This could result in reduced trust in Singapore’s role as a neutral mediator or regional balancing point. The implication is China may become more cautious in deepening sensitive technological or strategic cooperation with Singapore.
Singapore’s role in regional initiatives like RCEP or Belt and Road may be watched more closely by Beijing for signs of “Western influence.”
Strategic Hedge by Singapore
Singapore is seen as a small state navigating a volatile global order by hedging across power centers. Sanctioning Russia signals a values-based foreign policy, but one that must also maintain strategic autonomy. Singapore may need to redouble efforts to reassure China of its neutrality and long-standing constructive engagement.
It may leverage economic diplomacy via trade, investment cooperation, or tech to rebuild or reinforce ties. The implication here is the sovereign wealth entities GIC and Temasek may find political constraints in its way should they feel a strategic rebalancing of their Chinese portfolio is necessary in view of heightened risks.
Singapore is seen as a small state navigating a volatile global order by hedging across power centers. Sanctioning Russia signals a values-based foreign policy, but one that must also maintain strategic autonomy. Singapore may need to redouble efforts to reassure China of its neutrality and long-standing constructive engagement.
It may leverage economic diplomacy via trade, investment cooperation, or tech to rebuild or reinforce ties. The implication here is the sovereign wealth entities GIC and Temasek may find political constraints in its way should they feel a strategic rebalancing of their Chinese portfolio is necessary in view of heightened risks.
Economic Interdependence as Buffer
Despite geopolitical tensions, both countries benefit economically. Singapore remains a major hub for Chinese outbound investment and trade finance. Singapore may focus on deepening its role as a “connector” in supply chains, especially in ASEAN, as China faces Western decoupling.
Areas like green finance, logistics, digital trade, and RMB internationalization could be promoted as “safe zones” of bilateral cooperation.
Despite geopolitical tensions, both countries benefit economically. Singapore remains a major hub for Chinese outbound investment and trade finance. Singapore may focus on deepening its role as a “connector” in supply chains, especially in ASEAN, as China faces Western decoupling.
Areas like green finance, logistics, digital trade, and RMB internationalization could be promoted as “safe zones” of bilateral cooperation.
Reputational Capital in ASEAN
Singapore’s principled stance may enhance its credibility among smaller ASEAN states that fear coercion. China may recalibrate by engaging Singapore more in multilateral settings rather than one-on-one dialogues.
Singapore could use this to maintain influence without appearing confrontational.
President Xi Jinping recently visited Thailand, Malaysia and Vietnam in his Southeast Asia tour. These 3 countries are direct beneficiaries of supply chain relocations from China, especially in electronics, semiconductors, and low to mid-end manufacturing. Xi’s visit signals Beijing’s desire to lock in friendlier industrial bases, counterbalance Western attempts to shift supply chains out of China, and promote yuan-denominated trade settlements in these countries.
Singapore and Indonesia were left out despite their strategic importance. This likely carries diplomatic signals relevant to the evolving US-China tariff and technology rivalry. China may be indicating that active cooperation in trade diversification and real economy projects (rather than financial intermediation) is now a higher priority.
One could read a subtle disapproval or strategic hold on Singapore’s positioning with regards to the quick sanctioning of Russia and perceived alignment with the West, especially on technology controls. The non-visit can be a quiet signal of dissatisfaction, without overt confrontation.
In the case of Indonesia, while economically important, it has shown interest in diversifying partnerships, including with the U.S. and Japan. Skipping Indonesia may suggest that Beijing is waiting to see a clearer stance on issues like rare earths, digital trade, and defense.
China's visit of Thailand, Malaysia and Vietnam may be a strategic re-anchoring of ties with mainland-leaning or neutral states of Asean first before engaging with more globally integrated ASEAN powers of Singapore and Indonesia. This phased approach also gives China more leverage—allowing it to demonstrate goodwill selectively and signal to others what kind of cooperation it favors.
China by-passing Singapore and Indonesia is not a break, but a pause. It is more likely a temporary message, not a long-term severing of engagement. China and Singapore maintain deep economic, financial, and educational ties. Similarly, China and Indonesia have major BRI projects (e.g. Jakarta-Bandung high-speed rail).
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Singapore’s principled stance may enhance its credibility among smaller ASEAN states that fear coercion. China may recalibrate by engaging Singapore more in multilateral settings rather than one-on-one dialogues.
Singapore could use this to maintain influence without appearing confrontational.
President Xi Jinping recently visited Thailand, Malaysia and Vietnam in his Southeast Asia tour. These 3 countries are direct beneficiaries of supply chain relocations from China, especially in electronics, semiconductors, and low to mid-end manufacturing. Xi’s visit signals Beijing’s desire to lock in friendlier industrial bases, counterbalance Western attempts to shift supply chains out of China, and promote yuan-denominated trade settlements in these countries.
Singapore and Indonesia were left out despite their strategic importance. This likely carries diplomatic signals relevant to the evolving US-China tariff and technology rivalry. China may be indicating that active cooperation in trade diversification and real economy projects (rather than financial intermediation) is now a higher priority.
One could read a subtle disapproval or strategic hold on Singapore’s positioning with regards to the quick sanctioning of Russia and perceived alignment with the West, especially on technology controls. The non-visit can be a quiet signal of dissatisfaction, without overt confrontation.
In the case of Indonesia, while economically important, it has shown interest in diversifying partnerships, including with the U.S. and Japan. Skipping Indonesia may suggest that Beijing is waiting to see a clearer stance on issues like rare earths, digital trade, and defense.
China's visit of Thailand, Malaysia and Vietnam may be a strategic re-anchoring of ties with mainland-leaning or neutral states of Asean first before engaging with more globally integrated ASEAN powers of Singapore and Indonesia. This phased approach also gives China more leverage—allowing it to demonstrate goodwill selectively and signal to others what kind of cooperation it favors.
China by-passing Singapore and Indonesia is not a break, but a pause. It is more likely a temporary message, not a long-term severing of engagement. China and Singapore maintain deep economic, financial, and educational ties. Similarly, China and Indonesia have major BRI projects (e.g. Jakarta-Bandung high-speed rail).
This platform has withdrawn it's subscriber widget. If you like blogs like this and wish to know whenever there is a new post, click the button to my FB and follow me there. I usually intro my new blogs there. Thanks.