CNA938 Rewind - Singapore SMEs could go on life support as Trump tariffs hit
CNA938 Rewind
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Some Singapore companies are shelving expansion plans amid crippling United States tariffs and a global economic slowdown, while others could go on 'life support mode'. What kind of 'rescue' solutions can be drawn up? And could PM Wong's new cabinet and deals signed at the ASEAN Summit provide solutions? Andrea Heng and Susan Ng find out from Ang Yuit, President, Association of Small and Medium Enterprises
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Business Times
43 minutes ago
- Business Times
Asean's export rush wanes as tariff clock ticks down
[SINGAPORE/KUALA LUMPUR/HANOI/JAKARTA] South-east Asia's export boom may be running on borrowed time as traders rush to front-load goods ahead of the end of US President Donald Trump's 90-day tariff pause on Jul 9, masking signs of fading momentum. While April's export data climbed year on year across much of the region, a closer look reveals a month-on-month slowdown that is already hitting Thailand, Vietnam and the Philippines, with the rest of South-east Asia likely to follow by the second half of the year. April trade figures suggest not just front-loading, but also a possible rerouting of US-destined China-origin goods through Asean economies, said Nomura analysts Rob Subbaraman and Toh Si Ying. Such front-loading means Asian export growth in the second quarter of the year could be stronger than projected, noted the duo in a May 28 report. But they warned that this may just be 'a brief respite before an Asian export slump in H2, driven by the inevitable payback from front-loading and an overall slowdown in global trade activity caused by the highest US tariff rates in over 80 years and historically high business uncertainty'. The major exporters in trade-reliant South-east Asia – Indonesia, Thailand, Malaysia, Vietnam and Singapore – face a looming slowdown. On the other hand, the Philippines – a net importer – saw front-loading taper off early. It could ultimately benefit from trade diversion and a potential US deal, as tariffs position its goods to become more competitive. The Business Times breaks down how the shifting trade tide is unfolding across the region. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Singapore: surge now, strain later Singapore's non-oil domestic exports surged 12.4 per cent in April – the fastest pace since July 2024 – driven by gains in both electronics and non-electronics, with the former buoyed by current tariff exemptions. The surprise jump was largely driven by front-loading, as exporters raced to capitalise on the tariff pause and get ahead of looming sector-specific duties on pharmaceuticals and semiconductors. The current boost is 'really no consolation', as advanced sales mean that exports will slow when markets have stocked up, said Deputy Prime Minister Gan Kim Yong recently as he gave an update on the work of the Singapore Economic Resilience Taskforce. Gan, who leads Singapore's tariff talks with the US, said Washington is open to discussion on 'some form of concession' in the impending sectoral tariffs, though it will not budge on the baseline 10 per cent duty. Economists warned of medium to long-term risks amid uncertainty over Trump's next move, though sentiment has improved with the unexpectedly swift easing of US-China trade tensions, said UOB's Jester Koh. But OCBC chief economist Selena Ling warned that whether the two players can reach a permanent trade deal remains to be seen. DBS senior economist Chua Han Teng flagged that global trade frictions remain elevated compared to pre-Trump 2.0 which could be a drag on Singapore's 2025 exports, though likely less severe than earlier feared. — ELYSIA TAN Malaysia: trade momentum meets tariff jitters Malaysia's exports rose 16.4 per cent year on year to RM133.6 billion (S$40.5 billion) in April, as exporters rushed to beat a now-delayed US tariff hike. The jump, from RM114.7 billion a year earlier, was led by a 9.1 per cent rise in domestic exports and a 46 per cent surge in re-exports, driven by strong global demand for electrical and electronic products. Electrical and electronic exports, led by semiconductors and data processing equipment, jumped 35.4 per cent year on year, marking five straight months of double-digit growth. Malaysia's total trade rose 7.2 per cent in the first four months of 2025, with MIDF Research expecting export growth to hold over the next few months as firms take advantage of the temporary tariff reprieve. Analysts remain cautious, with MIDF forecasting a slowdown in export growth to 2 per cent and imports to rise 4.5 per cent, as trade uncertainty and tariff risks persist. Bank Negara expects front-loaded exports to normalise soon. UOB economists Julia Goh and Loke Siew Ting flagged ongoing uncertainty as US trade talks continue, noting firms may scale back production on weaker demand expectations. Pending clearer outcomes, UOB maintains its 2025 export growth for Malaysia forecast at 3.8 per cent. — TAN AI LENG Thailand: export fever cooling Thailand may have notched its tenth straight month of year-on-year export growth in April, but the pre-tariff shipping rush is losing steam. Exports rose 10.2 per cent from the prior year – a clear pullback from March's 17.8 per cent surge. Thailand posted US$25.6 billion in exports in April, amounting to a US$3.3 billion trade deficit, revealed data released by the kingdom on May 26. Bank of America's emerging Asia economist Pipat Luengnaruemitchai said April's cooling confirms the house's view that the strong first-quarter performance was temporary, driven by front-loaded shipments ahead of anticipated tariffs. In a May 26 report on Thailand's trade balance, he said: 'Combined with limited domestic production gains and increasing external pressure, Thailand's export and trade balance outlook remains weak in the coming quarters.' He added that more Chinese products may enter the kingdom as Beijing sources for alternative markets. Industrial and agro-industrial products continue to be key growth drivers of Thailand's exports. Notably, a jump in gold exports for a second month kept Thailand's exports robust. Maybank analysts Erica Tay and Chua Hak Bin noted in a recent report that exports of the yellow metal surged 250.5 per cent in April (and 269.5 per cent in March), which accounted for a third of export growth in Thailand – one of the largest physical gold trading hubs. While there is little visibility on bilateral trade talks with the US, the house expects tariffs on Thailand to stay within 30 per cent. — GOH RUOXUE Vietnam: tariff boost to factory blues Vietnam posted strong export growth in April, driven by a spike in orders after the US delayed its 'Liberation Day' tariffs and temporarily exempted some electronic goods. Despite facing a looming 46 per cent reciprocal tariff – among the highest in Asia – Vietnam's exports and imports surged in April by 19.8 per cent and 22.9 per cent year on year to US$37.45 billion and US$36.87 billion, respectively, Vietnam Customs indicated. However, exports dipped 2.8 per cent from March, while imports were flat. Vietnam's electronics exports surged nearly 59 per cent in April, while footwear and textiles rose more than 20 per cent and 17 per cent, respectively, boosting its trade surplus with the US by 25 per cent in the first four months of 2025. At the same time, its trade deficit with China widened by more than 44 per cent. The balance of trade is a key point in the tariff negotiations between Hanoi and Washington. The two countries concluded their second round of trade talks on May 22 and are expected to continue in early June, based on a statement from Vietnam's trade ministry. So far, Hanoi has not only offered to purchase more US goods and reduced tariffs on certain imports, but has also taken steps to address Washington's non-tariff concerns, including fraud related to the origin of goods transshipped from China. Tariff uncertainty is dampening sentiment among Vietnamese manufacturers, with business confidence sinking to its lowest since August 2021, according to S&P Global's April purchasing manager's index survey. Factory activity shrank at the fastest pace since May 2023, as new orders and overseas demand had sharp declines. — JAMILLE TRAN Indonesia: short-term gains, long-term doubts Indonesia's exports climbed 5.8 per cent year on year in April to US$20.7 billion, driven by a 60 per cent increase in electrical machinery shipments and solid gains in iron and steel. Meanwhile, imports jumped 21.8 per cent year on year to US$20.6 billion in April, outpacing export growth and dragging the monthly trade surplus down to a five-year low of US$158.8 million, based on data released by the statistics agency on Jun 2. On a monthly basis, Indonesia's exports dropped 10.8 per cent, which Permata Bank economist Josua Pardede attributed to the typical slowdown during the Eid holidays. 'Additionally, weaker prices for key commodities like crude palm oil and coal are expected to have contributed to the monthly decline,' he said. Exports to the US jumped 18.4 per cent year on year in April, with Bank Central Asia economist David Sumual attributing the rise to front-loading shipments ahead of impending US tariffs. Indonesia's non-oil and gas exports to the US were driven by machinery and electrical equipment, up 17 per cent, alongside solid gains in footwear and apparel. This helped deliver a US$5.4 billion trade surplus with the US from January to April – now under scrutiny as Washington considers a 32 per cent tariff on key sectors. In contrast, Indonesia posted a US$6.9 billion trade deficit with China over the same period, driven by surging imports of machinery, vehicles parts and electronics. Sumual said: 'It appears there is also dumping of goods from China ahead of the tariff deadline.' Maybank economist Brian Lee said the rerouting and import surge from China will likely ease in May and reduce pressure on the trade surplus, given China's trade deal with the US that cut tariffs to 30 per cent from 145 per cent for 90 days. Economists at Samuel Sekuritas wrote while exports are expected to stay positive, global uncertainties and a weaker rupiah could limit gains and raise import costs. — ELISA VALENTA The Philippines: modest tariffs, muted trade Front-loading tied to the Philippines tapered off after the announcement of the tariffs, which imposed a relatively modest 17 per cent levy – the second-lowest among Asean countries after Singapore. If enacted after the 90-day pause, the lower tariff could make Philippine goods more competitive in the US, positioning the net-importing nation to attract diverted trade and investment despite its limited reliance on export-led growth. 'We'll have to wait and see if this does materialise into better export volumes to the US,' said Nicholas Antonio T Mapa, chief economist at Metropolitan Bank. ANZ Research expects a trade agreement between Manila and Washington could be struck by the end of June, with a possible lower tariff rate of 10 to 15 per cent. Preliminary data from the Philippine Statistics Authority showed weaker trade in April, with total value down 2 per cent year on year. Exports rose 7 per cent but marked their slowest growth this year and fell 9.2 per cent from March, while imports dropped 7.2 per cent year on year and 8 per cent monthly – the first decline since December. Electronics remained the top export, accounting for more than half of outbound sales. The trade deficit from January to April narrowed slightly to US$15.9 billion. April's import slump reversed the sharp 17.8 per cent surge seen in March – the strongest since August 2022. The steepest drop came from mineral fuels and lubricants, down 35.1 per cent, while imports of raw materials and intermediate goods – a key gauge of production outlook – swung from a 22.4 per cent rise to an 11 per cent decline. 'It was partly tied to softer prices (on weakening greenback) but perhaps also evidence of moderating demand,' added Mapa. The Philippines' economy relies heavily on domestic consumption, which accounts for about two-thirds of the country's gross domestic product. –– JAMILLE TRAN
Business Times
an hour ago
- Business Times
China's EV manufacturers face their ‘Evergrande moment'
YOU know that things have reached an inflection point when China's People's Daily newspaper warns against 'involution' in an industry, noting that firms and factories have been racing to produce the same products and barely making a profit. In this case, the warning was aimed at the 100 or so electric vehicle (EV) makers. That number is, by any measure, way more that any car market, even one as big as China's, can sustain. Evidence that the nation's car market remains oversupplied has been mounting in recent years. As recently as five years ago, there were about 500 firms producing EVs. That their numbers have declined so dramatically provides a useful metric about brutal market conditions. Indeed, one industry executive spoke of an industrial 'elimination round' taking place over the next two years. A few days later, the chairman of Great Wall Motor, Wei Jianjun, was quoted as saying that China's EV industry is experiencing its own 'Evergrande moment', referencing the collapse of the country's most indebted property developer last year. The fear among carmakers (and economists) is that, as it was with the crash of China's property giants, cascading bankruptcies in the EV industry will spread misery not just throughout the automotive sector as suppliers and dealers go under, but, eventually, the wider economy will feel the chill. However, from a macroeconomic perspective, everything is going well. Cut-throat competition is driving efficiency and innovation. For instance, BYD, one of the three car firms actually making some profit, is furiously trying for a breakthrough in autonomous driving with its so-called God's Eye technology. Tesla, which has a big presence in China, says it will unveil its self-driving robotaxis on Jun 12. These vehicles are reported to be undergoing trials in Austin, Texas. Then again, robotaxis were first promised in 2016. It should be noted at this juncture that the consolidation in China's automotive sector hews to a familiar script. That is the way Beijing's industrial policies play out. Subsidies and policy support are bestowed on favoured industry players until they reach a certain size, and when they are deemed ready to compete with anyone in the world. Beijing then stands back and allows the market to sort out the winners from the losers. We have seen how this approach worked with solar panel manufacturers. It is harsh and unforgiving, but it is certainly far better than the system of continual state support for ailing zombie firms, which has now become almost routine in the West. That said, it should be noted that there are some 3.5 million EVs piling up as unsold stock in China, despite incentives Beijing has offered to encourage owners of combustion-engine vehicles to trade them in for EVs. Prices are being cut. One BYD sedan is selling for as little as 69,800 yuan (S$12,487). More significantly, China's top carmakers are still only operating at half capacity. Expect a push to export the surplus. In Asean, Thailand, Indonesia and Malaysia have their own automotive industries. How will they react if a tsunami of cheap, but technically superior, cars swept into their markets? The instinct may be to erect tariffs walls and subsidies, to protect the local industrial base and the supply chains and, above all, jobs. The better option might be to invite the best of China's car producers to set up factories locally and let the market decide the winners.
CNA
2 hours ago
- CNA
Commentary: US speech at Shangri-La Dialogue hit the right notes – but talk is cheap
SINGAPORE: Since the first Shangri-La Dialogue (SLD) in 2002, every sitting United States Defense Secretary has delivered an address at the summit to explain their strategic vision for the region and reassure US allies and partners. Pete Hegseth continued this long tradition with his speech on Saturday (May 31) at this year's edition of the security forum. Taken at face value, his speech hit all the right notes. But talk is cheap. His domestic talking points, his insistence that Asia spend more on defence, and inconsistencies between his statements and US actions may raise more questions than answers. BRINGING MAGA TO ASIA 'America is proud to be back in the Indo-Pacific – and we're here to stay,' Mr Hegseth proclaimed. Yet many points hinted at him not just addressing audiences in Singapore, but back in Washington too. On one hand, talking about how the US defence establishment is improving its capabilities, from raising the defence budget to over US$1 trillion to investing in American shipbuilding, supports his assertion that America is 're-establishing deterrence around the world' by building 'credible deterrence' at home. His proclamation that Washington is shunning its past 'moralistic and preachy approach' was even likely welcomed by some Southeast Asian officials in the room, given past efforts to tout liberal values were met with a mixed response. However, not all these domestic references were welcomed by international audiences. References to an 'invasion of 21 million illegals' and US President Donald Trump's electoral victory, for example, are targeted at the MAGA (Make America Great Again) crowd. An allusion to 'taking back the Panama Canal' was likely met with concern by smaller countries. Dismissing climate change as something that was 'preached' by previous governments, while politically popular with the MAGA base, underplayed what many regional governments consider an existential security issue. Perhaps the clearest sign that Mr Hegseth had his mind on a domestic audience were the worrying statements made about China. In years past, Washington has claimed to engage the region on its own merits, refraining from calling out China directly. In the Biden era, China was generally framed as a 'serious competitor' with whom cooperation was necessary, with the term 'threat' reserved for North Korea and more recently, Russia. Even under Trump 1.0, officials tended to criticise 'threatening' policies and actions. Yet, Mr Hegseth seemingly discarded this facade, explicitly calling China a threat. Mr Hegseth also claimed that an invasion of Taiwan 'could be imminent,' even as Director of National Intelligence Tulsi Gabbard said – on the same day after his speech – China does not want a war. While not surprising, this stridently anti-China stance raises concerns about how the US might engage Southeast Asia. The apparent gulf between what Southeast Asian governments and Washington consider important, including a confrontational approach to China and dismissal of climate change, may hinder cooperation going forward. INSISTENCE THAT ALLIES AND PARTNERS DO MORE ON DEFENCE US officials have traditionally called on European counterparts to bear a greater portion of the financial burden for their security. This time, YetMr Hegseth called for US Asian allies and partners in Asia to follow suit with 5 per cent of their gross domestic product. No country in Asia currently spends that much on defence. According to the SIPRI military expenditure database, most ASEAN countries spent less than 1.5 per cent of their GDP on defence in 2024. Even Japan and South Korea which have been actively modernising their militaries spent 1.4 per cent and 2.6 per cent respectively. Singapore is the outlier with roughly 3 per cent, still well below Mr Hegseth's expectations. This is not to say that Asian countries are neglecting their defence capabilities. SIPRI data show that ASEAN military expenditures rose from US$20.3 billion in 2000 to US$48.3 billion in 2024. But it is unlikely that Washington's demand for 5 per cent will ever be achieved. Doing so would require a dramatic reworking of government budgets and legislation, along with potential political unrest trouble asif guns are seen to be prioritised over butternecessities and infrastructure. The flipside is that Washington may pressure Asian allies that do not spend enough – including with the pledge of US protection itself. After all, as US President Donald Trump remarked on the election trail, he would encourage Moscow to do ' whatever the hell they want ' to NATO members who do not spend enough on defence. WHAT AMERICA SAYS AND WHAT IT DOES There are also inconsistencies between Mr Hegseth's words and the US' recent actions. Most leaders in the region would welcome his acknowledgment of the 'geographic necessity' of economic cooperation with China, for example. Or promising to work with regional governments as 'partners, not dependents.' Yet, Washington has levied tariffs universally on its 'partners', including countries with whom America has signed free trade agreements. Washington is also pressuring countries such as Malaysia to Vietnam to enforce rules of origin to cut down on transshipments of Chinese goods. The inconsistencies deepen the more you look. Mr Hegseth criticised China for a 'lack of respect for neighbours' but offered no explanation for how this is different from US ambitions in Greenland and Canada. He raised, as he did in Manila and Munich, that the Indo-Pacific is America's 'priority theatre,' but did not address concerns that munitions are being redirected to the Middle East to support US strikes on the Houthis. At the core of many of these concerns is the question: Is the US serious about its pivot to Asia? The idea of a pivot was first mooted in the Obama administration, but Washington has struggled to make this concrete amid crises in the Middle East and Europe. Just as Mr Hegseth invoked Singapore's founding prime minister, Mr Lee Kuan Yew, in his speech, it would be helpful for US officials to recall Mr Lee's thoughts on America's strengths and weaknesses from a decade ago. While America's 'creativity, resilience and innovative spirit' allow it to confront and overcome its core problems, the US cannot simply treat Asia like a movie that it can pause and resume at will. 'It does not work like that,' he said. 'If the United States wants to substantially affect the strategic evolution of Asia, it cannot come and go.' Yes, talk is cheap. It is now up to the US to practise what it preaches and convince the region of its credibility.
