Singapore Cuts Growth Forecast Amid US-China Tariff War

Singapore’s Ministry of Trade and Industry (MTI) has slashed its 2025 economic growth forecast to a range of 0% to 2%, down from the earlier projection of 1% to 3%, as the city-state braces for the fallout from an escalating US-China tariff war. Announced on April 14, 2025, this downgrade reflects mounting global uncertainties and domestic economic challenges, with some experts warning of a potential technical recession—defined as two consecutive quarters of GDP contraction—later this year.

Economic Slowdown and Tariff Pressures

The revised forecast comes against the backdrop of a tit-for-tat tariff conflict between the United States and China, which threatens to disrupt global supply chains and dampen economic activity worldwide. On April 9, US President Donald Trump announced a 90-day pause on reciprocal tariffs for most countries, but maintained a staggering 145% tariff on Chinese goods, prompting China to retaliate with a 125% tariff on American products effective April 12. Singapore, while spared the highest rates, remains subject to a flat 10% duty on goods exported to the US, implemented on April 5.

MTI highlighted “substantial downside risks” to the global economy, cautioning that the uncertainty could lead businesses and households to delay spending decisions, further slowing growth. The ministry also noted that a full-blown trade war could raise costs, upend supply chains, and potentially reverse the global disinflation process, increasing recession risks across advanced and emerging markets alike.

Prime Minister and Minister for Finance Lawrence Wong addressed the issue in a ministerial statement on April 8, acknowledging that while a recession is not certain, Singapore’s growth will be “significantly impacted” by the US tariffs. The government has pledged to monitor developments closely and adjust forecasts if necessary, signaling a cautious approach to an increasingly volatile external environment.

Domestic Economic Indicators Show Strain

Advance estimates from MTI reveal that Singapore’s economy grew by 3.8% year-on-year in the first quarter of 2025, a slowdown from the 5% growth recorded in the fourth quarter of 2024. On a quarter-on-quarter seasonally adjusted basis, the economy contracted by 0.8%, reversing a 0.5% expansion in the previous quarter. These figures fell short of market expectations, with analysts polled by Bloomberg anticipating a 4.5% year-on-year growth and a milder 0.4% contraction quarter-on-quarter.

Sectoral performance painted a mixed picture. Manufacturing growth, a key pillar of Singapore’s economy, moderated to 5% in the first quarter of 2025 from 7.4% in the prior quarter, though some activity was front-loaded in March as companies rushed to ship orders ahead of the US tariff announcements on April 2. The construction sector continued its steady expansion at 4.6%, while wholesale and retail trade, alongside transportation and storage, grew by a more modest 4.2%, down from 5.6% in the previous quarter. Growth in information and communications, finance, and insurance sectors slowed to 3%, though the finance sector was buoyed by strong banking and payment-related activities.

These numbers underscore the challenges Singapore faces as it navigates a high-base effect from 2024, when the economy grew by 4.4% for the full year, with particularly strong performances of 5.7% and 5% in the third and fourth quarters, respectively.

Expert Warnings of Recession Risks

Economists have sounded the alarm over the possibility of a technical recession in 2025, particularly if global trade tensions persist. Song Seng Wun, an economic adviser at CGS International, noted that Singapore faces heightened risks “given the many uncertainties surrounding the trajectory of economic growth.” He added that while a technical recession—two consecutive quarters of GDP contraction—would not be ideal, it remains a more favorable outcome than a full-year contraction.

Selena Ling, chief economist at OCBC Bank, echoed these concerns, stating that there is “no clear sign of bottoming yet.” She warned that the initial impact of US tariff announcements in April has already disrupted financial markets, with real economic fallout expected in the coming months. For the second half of 2025, Ms. Ling anticipates further weakening due to the high base of 2024, projecting full-year growth at around 1.6%, assuming the 10% tariff on Singaporean goods remains in place.

However, not all forecasts are as pessimistic. Maybank economist Brian Lee maintained a slightly more optimistic GDP growth projection of 2.1% for 2025, above MTI’s revised range. He suggested that the US tariff suspension for most countries, alongside potential trade and financial flow diversions, could cushion the blow to Singapore’s economy. Domestically, factors such as falling interest rates, a construction boom, and increased fiscal support are expected to bolster growth, though challenges remain.

Monetary Policy Adjustments and Global Implications

In response to easing inflation and rising economic risks, the Monetary Authority of Singapore (MAS) announced on April 14 that it would further slow the pace of the local currency’s trade-weighted appreciation. This move aims to support export competitiveness amid global headwinds, though it may offer only limited relief given the scale of external pressures.

Globally, the tariff war’s implications extend far beyond Singapore. MTI cautioned that disruptions to capital flows could expose vulnerabilities in banking and financial systems, while a broader economic slowdown might destabilize both advanced and emerging markets. The exclusion of electronics like smartphones and laptops from the highest US reciprocal tariffs provided temporary relief, but the subsequent inclusion of semiconductors in a separate import tax regime has raised fresh concerns for Singapore’s tech-driven export sector.

Navigating an Uncertain Future

As Singapore grapples with these challenges, the government faces the delicate task of balancing domestic stimulus with external uncertainties. Analysts suggest that additional fiscal measures, alongside targeted support for affected industries, could mitigate some of the tariff war’s impact. However, the city-state’s open economy remains highly exposed to global trade dynamics, leaving little room for complacency.

For now, businesses and households alike appear to be adopting a wait-and-see approach, as highlighted by MTI. This cautious sentiment could further dampen economic activity if confidence fails to recover. With the second half of 2025 expected to face additional pressures from the high base of 2024, the risk of a technical recession looms large, even if a full-year contraction is avoided.

As the US-China tariff war unfolds, questions remain about its long-term impact on Singapore’s economic trajectory. Will targeted exemptions and domestic policies be enough to weather the storm, or will the city-state face deeper challenges in the months ahead? Only time will tell, but for now, vigilance and adaptability remain key to navigating this unprecedented uncertainty.