Singapore businesses must move strategically to get on winning side of tariff war (2025)

THE deluge of latest developments in tariffs announced by the US, and the resulting countermoves from its trade partners, have made global trade more complex and uncertain.

The impact of these changes on Singapore cannot be understated. As Singapore Prime Minister Lawrence Wong put it, the Republic “will take a bigger hit than others because of our heavy reliance on trade”. Businesses in the city-state therefore face an urgent imperative to react strategically.

Implications for local businesses

The changing trade landscape presents both opportunities and challenges for local businesses.

On one hand, the “China Plus One” strategy – where businesses are diversifying their manufacturing and supply chains by establishing operations in countries beyond China – has been driving increased foreign direct investment into South-east Asia, including Singapore.

While South-east Asian markets brace for impact from fresh tariffs, the underlying trend of mitigating risk by spreading production across multiple countries is likely here to stay.

This means that Singapore is likely to continue welcoming more businesses setting up regional headquarters to leverage its strategic location, competitive tax environment and strong legal framework as a gateway to Asean markets.

Singapore Deputy Prime Minister and Minister for Trade and Industry Gan Kim Yong’s recent remarks affirm this point – that Singapore will double down on efforts to keep its economy open, and continue to seek opportunities for growth regionally and beyond. This includes ongoing negotiations to advance the Asean Trade-In-Goods Agreement, which would strengthen free flow of goods within member states.

Additionally, Singapore’s extensive network of 27 implemented Free Trade Agreements and well-established trade infrastructure strengthens its position as a preferred hub for high-value trade activities. Its advanced logistics network, robust financial services ecosystem and expertise in international trade compliance make it an attractive destination for businesses with global exposure.

On the other hand, the city-state is not immune to the impact of shifting tariff policies. Beyond the immediate impact of tariffs imposed on exports from Singapore to the US, a slowdown in global trade will have a ripple effect on Singapore’s economic expansion.

Moreover, given that the Republic is an international business hub, companies here may face increased compliance requirements and regulatory scrutiny due to a rise in export controls, notably by the US, which is Singapore’s largest foreign investor and one of its top trading partners. This would then translate to higher operational costs.

How businesses can adapt

The relative difference in the impact of tariffs on each country raises an important question for companies: are they on the winning side of the equation?

A company can be on the winning side if, relative to its competitors, its supply chain footprint is more advantageous. For example, its sourcing sites could be in countries subject to lower tariffs which will enable it to enjoy better cost structures. Business leaders should note this relative difference and identify opportunities to reinforce their competitive advantages.

With this in mind, businesses in Singapore should decide on their adaptation strategies by first understanding the impact of ongoing developments. This can be done via a comprehensive assessment of tariff-related exposure and risks across various aspects such as product classifications, regulatory compliance and impact on business financials.

They should carry out their analysis through three lenses:

• Inward – how their supply chain will be affected;

• Outward – how their competition will be affected, and why; and

• Forward – what the potential scenarios are and what key moves to make.

Based on this assessment, they can then take four actions.

Firstly, businesses need to adjust their supply chain capacities based on the impact of tariffs and competition. Businesses in sectors that are less affected for now, such as semiconductor manufacturing, which is broadly exempted from the new US tariff plan, should maintain their current supply chain capacities, or even consider further investments.

However, businesses that are set to take a bigger hit should consider optimising their supply chain networks or look for alternative sourcing. They should also re-evaluate their strategic plans for the next three years.

Secondly, businesses need to rethink their growth strategies. Scenario planning can help clarify which moves should be undertaken so that their strategies mitigate risks and are future-proof. These moves can be classified into three broad categories.

The first category involves “no regrets” moves such as building more supply chain flexibility to ensure business viability during turbulent times. The second category involves “contingent” moves like investing in or divesting from certain sourcing destinations – these moves should only be considered when the current wave of volatility subsides. The third category consists of “big bets” such as plans to launch new products or create new value chains, which may need to be paused for now given the shifting profit equations.

Executives should focus on identifying and making decisions based on various possible scenarios to overcome immediate challenges and gain a competitive advantage.

Thirdly, regardless of changes to the tariff landscape, businesses should double down on technology adoption. The rapid changes in global trade rules have reinforced the need for a technology-enabled operating model which incorporates advanced analytics and real-time data monitoring.

This gives businesses the agility and adaptability needed to navigate global complexities, with more data for analysis and faster decision-making. With the use of large language models, or deep learning models pre-trained on vast amounts of data, businesses can accelerate their strategic decision-making process and respond more effectively to challenges.

Finally, businesses should keep a lookout for measures announced at the national level. Countries’ responses are varied and dynamic, and could include trade negotiations or retaliatory measures that rewrite trade equations overnight.

In Singapore, businesses can leverage initiatives announced as part of the government’s 2025 Budget which are aimed at strengthening the enterprise ecosystem. These include immediate cost reliefs through a corporate income tax rebate and cash grant, as well as boosting skills upgrading and workforce transformation through credit schemes and grants.

Seizing opportunities

Singapore’s strong trade agreements, strategic location, pro-business policies and relatively low tariff exposure give businesses an advantage. However, several uncertainties remain – whether countries will retaliate or negotiate, whether further countermeasures will be introduced, how upstream or downstream value chain players will respond, among others.

In times of upheaval, there will inevitably be winners and losers in the global market. Business leaders should therefore be proactive and revisit their current strategies, rapidly generate new ideas to pivot, and start preparing to act decisively to remain on the winning end.

Samrat Bose is a partner and Chong Chor Ming is a senior manager at Monitor Deloitte in South-east Asia, a strategy consulting practice within Deloitte. The views and opinions expressed are solely their own and do not reflect the opinions of Deloitte.