Economics Assignment - Trade Tension

Running head: ECONOMICS ASSIGNMENT
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Name of the Student
Name of the University
Author Note

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Table of Contents
1. Introduction....................................................................................................................3
1.1. What is trade tension?..............................................................................................3
2. To explore the spillover effects for Singapore...............................................................3
3. To highlight the serious concerns of the Singapore’s economy if there is an escalation
trade tension...................................................................................................................5
4. How the Singapore government should be responded the current situations?.................7
5. Conclusion......................................................................................................................9
6. Referencing..................................................................................................................10

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1. Introduction
1.1.What is trade tension?
A disagreement that is being caused in-between the two or more economy at the time
of trading is known as trade tension. This is mainly caused because of the increase in the
number of growing trade organizations and of increasing complexity.
1.2. What are the reasons behind the US-China trade tension?
As the number of manufacturers is growing in China, due to their increase in
population, it is very difficult for Unites States to able to trade with them. Regardless of
this difficulty, there are certain unfair means which are being used by China at the time of
trading. All these things are seen by the President of the United States, and thus the
manufacturers are not willing to trade with them. China thinks that in another way, as
they used to think that as the economy is rising the Americans are not terrified to trade
with them anymore.
2. To explore the spillover effects for Singapore
2.1. Maritime and Shipping
In the region of Asia-Pacific, Singapore has the largest port there. Due to the
Strait of Malacca, Singapore enjoys most of the port area and is more successful in the
sector related to the maritime (Ko and Ha 2018). They have exhaled in many
activities and has become the leader in that regions, some of the activities that they
deal with are mentioned here: offshore building, marine insurance, forward freight
agreement trading, port terminal operations, ship financing, bunkering, and forward
freight agreement (Zoller and Felbermayr 2018). The Singapore maritime has

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established more than 5,000 units, and employed more than 1,70,000 employees, and
contributed more than 7 percent in their own country's GDP.
China has expanded its marine insurance market due to their rapid growth in
the economy. It does help in the trading between the countries and because of this
expansion it has many achievements, it became the second-ranking in of cargo
insurance sector. China has the largest market in the world related to the cargo
insurance market. Nowadays, Singapore is facing competition due to the growth of
China, and continuously China is investing in the sector of ports and the terminals
overseas, to achieve the ability of the port transshipment as the competitors and also
can achieve the efficiency of the units related to the terminal. At the time of currency
dealing or payment, Singapore use to help the organization of China with the Unites
States currency i.e. American Dollar ($).
2.2. Manufacturing or electric sectors
Several political concerns have affected the big organizations of China. The
trade war which is between China and the United States, have led to ban certain
products that will not be able to trade in between the countries. Thus, the brand which
is of China has faced many losses as the sales are decreasing day by day. Singapore
has major manufacturers of chipmakers, that sell goods to the tech giant
organizations, because of these effects they have to close the operations and most of
the people became unemployed (Li, He and Lin 2018). The economy of Singapore is
facing the effect of recession in the current period. Thus, the small organizations will
be shut off due to the trade war. The United States has also imposed tariffs on several
products that are imported from China, through which the economy of Singapore is
also facing certain imbalances. One of the biggest manufacturer of smartphones in
China i.e. Huawei were banned from selling their products in the market of United

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States (Huang et al. 2019). The reason which the state United States gave on behalf of
this ban is that there were security issues that will affect the economy of the United
States. Thus, it affects the organization Huawei very much and several losses make
them shut some of the production units.
2.3. Attracting financial investment
The economy of Singapore gets affected due to the trade war between the United
States and China, but it can be observed that the shares of the Singapore has made a big
hit if it is being compared to the rest of Asia (Bown 2019). The stock is giving a much
high dividend yield which is usually listed in the stock exchange. The investors are also
interested in investing in the listed stocks as it has a record of stable currency and the
equities of Singapore are also growing because of much higher investment (Zhu, Yang
and Feng 2018). Although the economy of Singapore has made certain losses as tariffs
were imposed on various goods and bans were also made on certain devices related to
technology.
The Monetary Authority of Singapore is the main financial regulator of Singapore;
thus the investors also get some support that there will not be many fluctuations in the
rate of currency and they invest relying on them. The currencies are fully controlled by
the central banks and the Monetary Authority of Singapore, so there are less fluctuations
if compared to the currencies of the other state (Swenson and Woo 2019). The investor
gets so many options, so they also want to see Southeast Asia region grow.
3. To highlight the serious concerns of the Singapore’s economy if there is
an escalation trade tension.
3.1. Slow demand in China

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The growth of both China and Singapore has been affected due to the trade war
between the two of the biggest economies i.e. the United States and China. There was a
direct effect on the airlines of China and Singapore, the freight of the airlines is decreased
as there was less demand as the financial position of the economy is falling (Yao, Lu and
Memon 2019). In the holiday season also, if there were there was much less demand and
the freight was much lesser if compared to the previous years, it was found as per the data
of IATA. The region of Asia-Pacific and middle east region has faced the most decline in
the season of October as there was no demand at all (Uphoff 2018). The demand of China
is being declined as most of the products are mainly banned and because of these the
trading between the countries is also decreased. The goods which were imported from
Japan and Germany were also decreased as the raw material which were needed to make
these products are being supplied from China (Babones 2019). Though it can be observed
that the products that are manufactured domestically are priced much higher than the
imported products. There is also less liquidity in that economy and because of this it is
being restricted to international trade, so it is suffering at the time of trading.
3.2. Increase import tariff (indirectly)
The Government of the United States has imposed several tariffs on the goods of
China that are mainly imported to the United States, due to this the economy of Singapore
is getting affected. In the meantime, China wants to roll back the tariffs which amounted
to billions of dollars if counted to the currency of America, through which it will help
Singapore as they help China at the time of exchanging currency. The officials of the
higher authority of both China and Singapore have approached the Government of the
United States to remove the system of tariffs to prevent the economy of both the China
and Singapore from damaging (Özer 2020). The approach was related to the tariff
removal of certain items that includes some of the gadgets, clothing, and appliances. The

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officials of the United States denied all the approaches, so the President of China wants to
meet Mr. Donald Trump to address these issues and for the removal of tariffs. The
Deputy Prime Minister Heng Swee Keat also warned as there is a greater economic
uncertainty due to the ongoing war.
3.3. Regional recession
The period of Recession which is being faced by the economy of Singapore because
the United States has started this by imposing all the tariffs on the products that have been
manufactured in both the countries i.e. Singapore and China (Yu 2019). Most of the
industries are affected in Singapore and many supply chains were disrupted due to this
and it affect the economy very badly. Many stocks of the organizations of China are being
delisted from the stock exchange which has been done by the President of the United
States i.e. Mr. Donald Trump, this also affect the economy of Singapore as there are
several supporting organizations which operates in Singapore. The President also stated
the reason why he has done all this because China was using unfair means at the time of
trading. So he implemented all these and the economy of China and Singapore affect
badly as the recession period is faced by them (Sengupta and Rastogi 2018).
4. How the Singapore government should be responded the current
situations?
4.1. Expand regional markets
The Government of Singapore want to expand their businesses so that they can
recover from the situation that they are in the current period. The region of Asia-Pacific
has many opportunities to have growth in any sector of business. If there is any plan of
expansion, then there are many organizations those who are interested to get involved
with the organizations of Singapore (Yeo 2019). The Asia Pacific region is known as the

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most dynamic region in all the global economy as it has so many growth opportunities
that will help in the demographics. There will be certain considerations that have to be
seen by the organizations those who are participating for their expansion and have to
focus on the social and economic matter as well. Some of the foreign organizations have
faced some difficulty considering that there are use of the regional languages and certain
business practices which are not known by them (Liu and Woo 2018). As the region is
unique and full of opportunities there is the business expansion is much easier there and
the challenges which are being faced can also be taken care of. There can be
implementation of several marketing approaches through which the organization will get
benefitted as through advertisement the consumers will going to know about the products
and the services that the organizations are providing.
4.2. Strong digital capabilities
Singapore is known for its strong digital capabilities, for this, it helps the economy to
have a growth and have a secure future. With the help of innovation and technological
advancement, they get the most of the benefit and does have some strong digital
capabilities (Ariel, Andrew and Rachel 2019). There are many organizations in which
they help to carry out the process of innovation and help to achieve the motives which
they want to achieve. The economy of Singapore is getting help from the process of
Digitalization as they are benefitting with the use of it. This helps the economy of
Singapore to achieve the growth and to keep some strong capabilities for their bright
future.
4.3. Diversify international Connections
The Government officials has adopted certain strategies to overcome the global
uncertainty through diversify, innovation and train the workers. The workers are provided
training, so that they can protect themselves from the trade war effects between the China

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and United States. As the trade war is not only affecting Singapore, but also affects the
neighbor countries like Japan, Hong Kong and South Korea. Thus, Singapore is working
on certain big plans which will help them in the diversification of markets, supply chains
and also the product mix. The diversification of portfolio is being done upon the free
trade agreements which is issued by the Government of Singapore; it will help the
organizations to trade all over the world.
5. Conclusion
From the above discussion of the report on the effects of the trade war between the
United States and China, it can be concluded that the economy of Singapore is suffering
the most. The main issue is that China is facing imposing tariffs on several products at the
time of import and export. Though as Singapore has a good background of business they
are not getting much effect as the economy of China is facing. The economy of China
will take a certain time to regrow from the situation where they are at present. As
Singapore is known as the dynamic economy and with the help of technological
advancement and innovation they will have an easy road of recovery.

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6. Referencing
Ariel, T., Andrew, L. and Rachel, H. eds., 2019. Singapore Perspectives: Singapore.
World. World Scientific.
Athukorala, P.C., 2017. China’s evolving role in global production networks:
Implications for Trump’s trade war. China’s New Sources of Economic Growth: Human
Capital, Innovation and Technological Change, 2, pp.363-388.
Babones, S., 2019. China Is Bluffing in the Trade War.
Bown, C., 2019. The 2018 trade war and the end of dispute settlement as we knew
it. Trade War, p.21.
Guo, M., Lu, L., Sheng, L. and Yu, M., 2018. The Day After Tomorrow: Evaluating the
Burden of Trump's Trade War. Asian Economic Papers, 17(1), pp.101-120.
Huang, Y., Lin, C., Liu, S. and Tang, H., 2019. 7 Supply chain linkages and financial
markets: Evaluating the costs of the US-China trade war. In Trade War: The Clash of
Economic Systems Endangering Global Prosperity (pp. 65-72). CEPR Press.
Ko, J.H. and Ha, J.W., 2018. A Trade War between China and the United States and Its
Likely Economic Impacts. Journal of Global and Area Studies (JGA), 2(2), pp.47-64.

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Li, C., He, C. and Lin, C., 2018. Economic Impacts of the Possible China–US Trade
War. Emerging Markets Finance and Trade, 54(7), pp.1557-1577.
Liu, T. and Woo, W.T., 2018. Understanding the US-China trade war. China Economic
Journal, 11(3), pp.319-340.
Özer, A.C., 2020. The Effect of the US-China Trade War on Global Trade.
In International Trade Policies in the Era of Globalization (pp. 56-70). IGI Global.
Sengupta, A. and Rastogi, S.K., 2018. US-China Trade War Data: Truth and Post-
Truth. World Economics, 19(4), pp.189-212.
Swenson, D.L. and Woo, W.T., 2019. Understanding the US-China Trade War. Available
at SSRN 3488454.
Swenson, D.L. and Woo, W.T., 2019. Understanding the US-China Trade War. Available
at SSRN 3488454.
Uphoff, E., 2018. Intellectual property and US relations with Indonesia, Malaysia,
Singapore, and Thailand. Cornell University Press.
Yao, H., Lu, Y. and Memon, B.A., 2019. Impact of US-China Trade War on the Network
Topology Structure of Chinese Stock Market. Journal of Asian Business Strategy, 9(2),
pp.235-250.
Yeo, G., 2019. Singapore and the World. China and the World, 2(01), p.1950001.

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Yu, H., 2019. Why did the United States launch a “trade war” against China?.
Zhu, Z., Yang, Y. and Feng, S., 2018, May. Trade War between China and US. In 2018
International Conference on Advances in Social Sciences and Sustainable Development
(ASSSD 2018). Atlantis Press.
Zoller-Rydzek, B. and Felbermayr, G., 2018. Who is paying for the Trade War with
China?. EconPol policy brief, 2018(11), pp.1-15.