SINGAPORE: Since the US presidential election victory of Donald Trump in November last year, Watson EP Industries has been preparing for the possibility of new trade tariffs that could impact its customers and operations.
The Singapore contract manufacturer makes audio and a range of plastic products out of its factory in Guangdong, China and of which, 40 per cent is shipped to the US.
Yet no amount of preparation appears sufficient for the sweeping tariffs announced by the US on Wednesday (Apr 2).
In what Trump dubbed “Liberation Day”, a steep reciprocal tariff on close to 60 economies with which the US has the largest trade deficits will kick in on Apr 9. These include superpower rival China, which faces a 34 per cent tariff rate, on top of the 20 per cent levy previously imposed on the country, bringing the total new levy to 54 per cent.
The US also announced a universal tariff of 10 per cent on all imports into the US, including those from Singapore, from Apr 5.
“Trump is known to be unpredictable so anything can happen but tariffs on almost all countries, including Singapore, is a surprise,” said Ms Joyce Seow, group executive director at Watson EP Industries.
Since a 20 per cent tariff was imposed by the US on China goods earlier this year, some of the contract manufacturer’s clients in the US had enquired if production could be done in Singapore instead.
Watson EP Industries has been exploring that option but will now need to re-examine its calculations given the raft of new tariffs.
“April will be a busy month for us as we study the costs involved and continue discussions with our customers on the viability of shifting some of these production to Singapore,” Ms Seow told CNA. “Even then, we don’t know if this is the end.”
The local firm is not alone in bracing for further uncertainties.
Singapore may have avoided much harsher levies, but others believe that the local economy will still feel a hit. In particular, businesses that are involved in cross-border trade and logistics, as well as those with production facilities in countries such as China.
Already, Association of Small and Medium Enterprises (ASME) president Ang Yuit has heard of concerns brewing among some business owners.
“Because the tariffs are so wide-ranging, people will be scrambling around and wondering, ‘Should I reconfigure my shipping routes or should I be moving elsewhere?’” said Mr Ang.
“All these reconfigurations create inefficiencies in the system and changes such as how some of your existing customers may no longer be viable.”
In the near term, the macro-environment is set to become “more complicated” with businesses likely facing the threat of even higher costs, he added.
The Singapore Semiconductor Industry Association (SSIA) also sees increased cost pressures on the back of “significant” new tariffs, especially for firms that ship components to the US or are sub-assemblies as part of multi-country manufacturing chains.
In the long run, tariffs may influence how companies plan their global operations, including sourcing strategies and the structuring of their manufacturing footprints, said executive director Ang Wee Seng.
There are also secondary effects, such as trade diversion and policy uncertainties, that may affect business confidence and supply chain stability.
For now, firms in Singapore are still assessing the situation, but SSIA is “optimistic about the resilience and adaptability” of the sector.
Beyond near-term repercussions, a bigger concern is the risk of a recession in the US and a fall in demand from the world’s biggest economy, industry players said.
The fresh slew of tariffs can also fan inflation and slow down global growth, which will in turn affect consumer sentiment and business spending across multiple industries, they added.
Even the technology industry will not be insulated, according to SGTech’s chair Nicholas Lee.
“We may also see businesses take a more cautious approach by either delaying investment decisions or reallocating budgets to cushion against higher operational costs,” he said.
“This could result in trimmed IT budgets and reduced spending on digital transformation, which would impact local tech companies.”
But not all is doom and gloom, said Mr Lee, citing “opportunities for non-US firms to step in as alternative providers”.
“In fact, some large regional enterprises already facing rising costs from US vendors are considering switching providers – this could accelerate that shift,” he told CNA.
Business leaders urged Singapore businesses to double down on workforce upskilling and digitalisation, while remaining nimble in adapting to an uncertain future.
In the case of Watson EP Industries, contingency plans continue to be drawn up, although it is also taking on a wait-and-see approach amid what it calls a “super volatile” situation.
“There are always a lot of discussions with customers whenever something is announced, but we have learnt that we cannot straight away jump into action,” said Ms Seow.
“Because Trump may change his mind, as we have seen, so what we can do is to plan as best as we can … and be very careful, especially when it involves costs.”
For example, it is now mulling whether to rent or purchase new spaces to accommodate the possibility of shifting production back here.
“There are spaces available for rent or purchase, but we need to weigh the risks of any possible change in tariffs and what will happen if customers want to shift production back to China,” Ms Seow said.
Firms in Singapore also have to consider existing constraints, such as manpower.
Ms Seow noted that other local manufacturing firms have received similar requests from their customers on the possibility of relocating production to Singapore.
“Labour has always been a problem, so we hope the government can look at perhaps a temporary increase in employment quotas to help manufacturing firms with this wave of possible orders coming into Singapore.”
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The Singapore contract manufacturer makes audio and a range of plastic products out of its factory in Guangdong, China and of which, 40 per cent is shipped to the US.
Yet no amount of preparation appears sufficient for the sweeping tariffs announced by the US on Wednesday (Apr 2).
In what Trump dubbed “Liberation Day”, a steep reciprocal tariff on close to 60 economies with which the US has the largest trade deficits will kick in on Apr 9. These include superpower rival China, which faces a 34 per cent tariff rate, on top of the 20 per cent levy previously imposed on the country, bringing the total new levy to 54 per cent.
The US also announced a universal tariff of 10 per cent on all imports into the US, including those from Singapore, from Apr 5.
“Trump is known to be unpredictable so anything can happen but tariffs on almost all countries, including Singapore, is a surprise,” said Ms Joyce Seow, group executive director at Watson EP Industries.
Since a 20 per cent tariff was imposed by the US on China goods earlier this year, some of the contract manufacturer’s clients in the US had enquired if production could be done in Singapore instead.
Watson EP Industries has been exploring that option but will now need to re-examine its calculations given the raft of new tariffs.
“April will be a busy month for us as we study the costs involved and continue discussions with our customers on the viability of shifting some of these production to Singapore,” Ms Seow told CNA. “Even then, we don’t know if this is the end.”
HIGHER COSTS IN THE NEAR TERM
The local firm is not alone in bracing for further uncertainties.
Singapore may have avoided much harsher levies, but others believe that the local economy will still feel a hit. In particular, businesses that are involved in cross-border trade and logistics, as well as those with production facilities in countries such as China.
Related:
Already, Association of Small and Medium Enterprises (ASME) president Ang Yuit has heard of concerns brewing among some business owners.
“Because the tariffs are so wide-ranging, people will be scrambling around and wondering, ‘Should I reconfigure my shipping routes or should I be moving elsewhere?’” said Mr Ang.
“All these reconfigurations create inefficiencies in the system and changes such as how some of your existing customers may no longer be viable.”
In the near term, the macro-environment is set to become “more complicated” with businesses likely facing the threat of even higher costs, he added.
The Singapore Semiconductor Industry Association (SSIA) also sees increased cost pressures on the back of “significant” new tariffs, especially for firms that ship components to the US or are sub-assemblies as part of multi-country manufacturing chains.
In the long run, tariffs may influence how companies plan their global operations, including sourcing strategies and the structuring of their manufacturing footprints, said executive director Ang Wee Seng.
There are also secondary effects, such as trade diversion and policy uncertainties, that may affect business confidence and supply chain stability.
For now, firms in Singapore are still assessing the situation, but SSIA is “optimistic about the resilience and adaptability” of the sector.
Related:
LONGER-TERM GROWTH IMPACT
Beyond near-term repercussions, a bigger concern is the risk of a recession in the US and a fall in demand from the world’s biggest economy, industry players said.
The fresh slew of tariffs can also fan inflation and slow down global growth, which will in turn affect consumer sentiment and business spending across multiple industries, they added.
Even the technology industry will not be insulated, according to SGTech’s chair Nicholas Lee.
“We may also see businesses take a more cautious approach by either delaying investment decisions or reallocating budgets to cushion against higher operational costs,” he said.
“This could result in trimmed IT budgets and reduced spending on digital transformation, which would impact local tech companies.”
But not all is doom and gloom, said Mr Lee, citing “opportunities for non-US firms to step in as alternative providers”.
“In fact, some large regional enterprises already facing rising costs from US vendors are considering switching providers – this could accelerate that shift,” he told CNA.
Business leaders urged Singapore businesses to double down on workforce upskilling and digitalisation, while remaining nimble in adapting to an uncertain future.
Related:
In the case of Watson EP Industries, contingency plans continue to be drawn up, although it is also taking on a wait-and-see approach amid what it calls a “super volatile” situation.
“There are always a lot of discussions with customers whenever something is announced, but we have learnt that we cannot straight away jump into action,” said Ms Seow.
“Because Trump may change his mind, as we have seen, so what we can do is to plan as best as we can … and be very careful, especially when it involves costs.”
For example, it is now mulling whether to rent or purchase new spaces to accommodate the possibility of shifting production back here.
“There are spaces available for rent or purchase, but we need to weigh the risks of any possible change in tariffs and what will happen if customers want to shift production back to China,” Ms Seow said.
Firms in Singapore also have to consider existing constraints, such as manpower.
Ms Seow noted that other local manufacturing firms have received similar requests from their customers on the possibility of relocating production to Singapore.
“Labour has always been a problem, so we hope the government can look at perhaps a temporary increase in employment quotas to help manufacturing firms with this wave of possible orders coming into Singapore.”
Continue reading...