Businesses cannot bank on tariff rollbacks to come with political transition; higher costs to stay: DPM Gan

Business Times

6 hours ago

[SINGAPORE] Enterprises must be prepared for lasting US tariffs and higher export costs to the world's largest economy to endure, rather than counting on the levies to end with a change in administration after four years.
Deputy Prime Minister Gan Kim Yong, who is also Singapore's minister for trade and industry, said this in his opening remarks at the Asean Conference on Thursday (Jul 3).
The day-long event at the Resorts World Convention Centre was organised by the Singapore Business Federation, alongside founding partners UOB, RSM Singapore and Rajah & Tann.
In line with this year's theme of 'Asean integration in the multipolar world', DPM Gan noted: 'There is growing bipartisan consensus within the US on the use of tariffs to achieve fair and balanced trade with the world, as well as to 'reshore' or 'near-shore' critical industries.'
He added that a rising fiscal deficit means that tariffs will increasingly be an important source of tax revenue for the American government.
And though many firms today are pushing back on tariffs, DPM Gan contended that upon investing in the US and setting up production bases there, their incentive would be to ensure these duties stay in place so as to protect their investments.
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He urged businesses to prepare for greater scrutiny over their production and supply chains, and set up separate lines for exports to the US versus the rest of the world.
'To benefit from lower tariffs – especially in sectors such as steel, autos and, in time to come, pharmaceuticals – companies must be prepared to meet the US' conditions… even if these requirements come at a much higher cost,' he said.
On top of differentiation, firms must also diversify into new markets – perhaps even new products and services.
Even with concerted effort among like-minded partners to preserve an open global trade environment, we must be prepared for a more protectionist landscape ahead, he said.
What does America want?
Commenting on the recent news of Vietnam's trade agreement with the US that supposedly culminated in a lower-than-promised 20 per cent levy, DPM Gan noted that everyone is 'eagerly waiting' for the outcome of US negotiations with the rest of its key trading partners.
It is important to reflect on the US' intentions, he continued.
For one thing, the superpower wants 'fair and balanced trade' with the rest of the world – but this also does not translate into an indifference to free trade or, more specifically, trade barriers against its exports, contended the minister.
'In fact, the US is also looking to address non-tariff measures in these discussions, such as standards, testing and certification requirements, and sanitary and phytosanitary requirements,' he said.
Furthermore, the US wants to reshore or near-shore domestic production in industries in the likes of steel, pharmaceuticals and semiconductors that it views as key to national and economic security, which explains its product-specific tariffs.
A global, rules-based framework
DPM Gan noted that the US has not yet given up on the multilateral trading system.
Though the US has criticised the World Trade Organization (WTO) for what it sees as an inability to effectively address issues such as non-market practices and overcapacity, it has not pulled out of the international forum, said the minister.
Maintaining that the WTO remains an important institution foundation on which to build stronger global, rules-based trade architecture, DPM Gan said: 'While the system is not perfect, we should not abandon it.'
He reiterated Asean's commitment to working together to strengthen the WTO and the global, rules-based trading framework.
'Without a rules-based global trading system – and, in particular, the assurance that global trade will continue to be conducted on a free, fair and non-discriminatory basis – we risk being at the mercy of larger economies that possess stronger levers on account of their market size,' he said.