Navigating Trade, Tariffs and Supply Chain Shifts

Today I attended this seminar organized by the Singapore Mexico Chamber of Commerce. This seminar was the one we decided to organize to address the current tariff uncertainty created by Trump.

It was well attended and there was one session that I found very useful.

I found this slide interesting. This slide was based on takeaways from a talk by a US Ambassador as to what the US was looking to achieve via tariffs.

a) reducing dependence on China, b) increasing revenue via tariffs to reduce the deficit and c) enhancing supply chain resilience and economic resilience in certain strategic sectors.

There will also be greater enforcement of rules of origin.

And there are certain identified sectors which will face tariffs as the plan is to to either have these manufactured in the US or very near the US. These sectors include pharmaceuticals, semi conductors, ICT, steel, aluminum, autos and agriculture. The high tariffs imposed on import of goods from these sectors is to push the eventual manufacturing of these products to the US.

And the current thinking is that a baseline of 10% tariffs will be the norm.

All this will have a huge impact on Singapore. All our exported goods to the US may face a baseline 10% tariff, up from the current 0%. Also we are large exporter of pharmaceutical products, semiconductor and ICT products to the US. These sectors contribute a significant amount to our GDP and provide employment to a large number of people here. If the US wants to near shore these sectors and impose high tariffs on imports there, at some point in time, companies may decide to uproot from other countries, including Singapore, and instead manufacture in Mexico, Canada or in the US.

Mexico currently is in a strong position because of the existing USMCA, which will be in force till 2036. Negotiations to extend this are currently underway. Under the USMCA, for qualifying goods there are no import tariffs, provided that the goods are wholly obtained or produced entirely in Mexico or it undergoes a significant transformation in Mexico.

I can see why Mexico is currently in the limelight and is attracting so much interest from manufacturers.

And I can also understand why Singapore is very concerned about the current situation. What do we have to offer to avoid general tariffs and specific industry tariffs? Why would the US treat us as an exception to their current philosophy? Can we find other markets to export to to take up the US slack?