US Tariffs & FX Volatility: A Guide for Singapore Investors

The United States of America has sparked a trade war with several countries over the last few months, with tariffs rising as high as 145% against China. Russia, Mexico, Canada,  Singapore, and dozens of other countries are also impacted by US tariffs, forcing governments to respond with changes in their trade policies. The Monetary Authority of Singapore (MAS) may respond by adjusting its monetary policy amidst global exchange rate volatility.

Updates on US Tariffs

US President Donald Trump imposed a new 10% tariff on all Chinese exports on 1 February 2025, just days after taking office. Trump raised tariffs to 10% on 3 March, bringing the cumulative new tariff to 20%. China retaliated on 4 February, raising tariffs on US coal and liquefied natural gas to 15% and 10% on crude oil, large cars, and agricultural machinery. The US’s and China’s reciprocal tariffs reached 104% and 84%, respectively, by 9 April.

The markets went wild, as data from Metatrader 4 Singapore indicated sharp changes in the stock market and currency prices. US stocks endured a chaotic month in March, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite taking hits before stabilising.

On 9 April, Trump announced an immediate increase to 125% for US import duties on Chinese imports, bringing the total to 145%. China retaliated on 10 April, raising tariffs on US goods to 125% from 84%. Although Trump suspended tariff increases for other countries, excluding China, the global base tariffs remain at 10%.

Singapore’s Economy and US Tariffs

As the third-largest trading partner with Singapore, the US tariffs are significant to Singapore’s economy. Singapore and the US trade under the US-Singapore Free Trade Agreement (USSFTA), reaching an estimated $89.2 billion in 2024. Despite having a healthy SingDollar relationship, Singapore was not exempted from the US blanket tariffs and is poised to take action, not retaliating but engaging the US and adjusting the Singaporean dollar (SGD) settings.

The ripple effects of the latest US tariffs will challenge Singapore’s economic growth, supply chains, and trade policies that influence its major sectors. As one of the critical players in global markets, Singapore’s financial services sector may experience increased volatility as exchange rate changes drive demand for alternative currencies to hedge risks.

The Impact of US Tariffs

For Singapore investors, the 2025 US tariffs present challenges and opportunities as different sectors and industries react to changes.

Trade and Manufacturing

Singapore’s manufacturing sector is deeply involved in global trade, especially its precision engineering and electronics industry. The semiconductor market has seen a higher demand in recent months. Singapore is also a leading manufacturer of aircraft components, biomedical products, and chemicals, including petrochemicals and pharmaceuticals. Higher tariffs might also increase the cost of manufacturing and consumers’ final cost.

The Asian country is also a hub for global trade and logistics, with a strategic location that makes it essential for efficient transport and supply chain management. Higher tariffs could increase the cost of goods and services in Singapore and directly influence local and international trade.

Financial Markets

Global financial markets are moved by economic indicators which drive supply and demand. Higher US tariffs can disrupt markets quickly, leading to massive volatility (usually a bearish market). For instance, the stock and crypto markets faced massive selloffs as investors quickly moved to safer markets.

In the Asian equity markets, tariffs cause significant volatility, and investors will see more fluctuations as markets adjust to the long-term implications of tariffs. The Singapore Straits Times Index plummeted b.5% on 7 April, experiencing its largest single-day drop in many months. The index fell another 2.2% on 9 April before recovering 8% on 10 April following Trump’s announcement of a 90-day tariff pause.

Another impact on financial markets is the increased volume of derivatives and securities as investors move from capital markets to avoid uncertainty.

Currency Settings

The MAS is adjusting settings for the SGD to ease monetary policy and stabilise global trade. Trump’s tariffs put the SGD and other currencies that use exchange rates instead of interest rates to stabilise prices. The MAS will implement a more aggressive easing and reduce inflationary pressure.

The MAS has stated that despite the tariffs, Singapore’s foreign exchange and money markets continue functioning normally and are ready to curb excessive volatility. The US tariffs and global economic conditions influence the SGD’s exchange rate, affecting the economy. Changes in the USD/SGD rate to the lower side could signal that the latter is gaining strength, making it more attractive than the former.

With inflation down to a four-year low, Singapore will insist on changes that ensure economic stability and the lowest possible disruption to its financial markets as Trump’s tariffs bring changes.

Tips for Singaporean Investors

Singaporean investors must trade cautiously during this period to avoid liquidation. Choppy markets present significant risks and opportunities to accumulate stocks at lower prices before a bullish cycle begins. Portfolio diversification is crucial for spreading investments and focusing on long-term returns over short-term volatility. It is also essential to monitor markets regularly, picking up economic data that influence market fundamentals and affect the demand and supply of various instruments.

Closing Thoughts: Opportunities for Singapore

As 2025 progresses, investors in Singapore face a complex economic period where US tariffs and exchange rate volatility are causing massive market changes. Investors can explore relatively safer instruments and focus on high-value manufacturing and services. Singapore’s plan to invest S$5 billion ($3.7 billion) with fund managers may boost local markets and present opportunities for investors/traders.