Economic Analysis: US-China Trade Tensions and Singapore's Response

This economics assignment analyzes the impact of US-China trade tensions on Singapore's economy, exploring the reasons behind the tensions and their spillover effects on various sectors, including maritime, manufacturing, and financial investment. The report highlights the serious concerns for ...Read More

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.........................................................................................................................2
2. To explore the spillover effects for Singapore....................................................................2
3. To highlight the serious concerns of the Singapore’s economy if there is an escalation
trade tension...............................................................................................................................4
4. How the Singapore government should be responded the current situations?.......................6
5. Conclusion..........................................................................................................................8
6. Referencing.........................................................................................................................9
7. Appendix...........................................................................................................................11

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1. Introduction
1.1. What is trade tension?
Trade tension can be defined as a term which is related to the disagreements at the
time of trade because of the growing complexity and the number of organizations and the
countries.
1.2. What are the reasons behind the US-China trade tension?
As China is one of the largest economies, it is very hard for the manufacturers of the
United States to tackle the trading switch the traders of China. The President of the
United States, Donald Trump has accused China about their unfair trading practices and
also due to intellectual property theft (Li, He and Lin 2018). In the case of China, they use
to think that the United States wants to curb the rise of global economic power.
2. To explore the spillover effects for Singapore
2.1. Maritime and Shipping
Singapore has one of the largest port in that entire region. There are many benefits
that the port has enjoyed, due to the Strait of Malacca and has become more successful in
the maritime industry (Rodan 2016). It is the leader in most of the area which includes
port terminal operations, offshore building, ship financing, marine insurance, bunkering,
ship brokering, forward freight agreement trading and maritime lawsuit jurisdiction
(Noland 2018). The ecosystem of the maritime comprises more than 5,000 establishments
and has more than 1,70,000 employees; in all total, it contributes almost 7 percent of the
GDP of the republic.
As there is a rapid growth in the economy of China, there is an expansion of the
marine insurance market. With the help of this expansion, they have achieved the position

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of the second-largest market in the sector of cargo insurance, and further, they have also
become the world's largest market for the cargo insurance market. Due to the enormous
growth of China, it become one of the biggest competitor of Singapore. China has also
invested billions of dollars upon the ports and the terminals overseas, so that they can
level up the port transshipment ability and also have the terminal efficiency (Hughes and
Meckling 2017). Singapore helps at the time of trade, as they clear the barriers as it is one
of the main concerns of the Chinese insurance organizations at the time of the dealing
with the currency of the United States.
2.2. Manufacturing or electric sectors
There are certain concerns that can be seen due to the trade war between China and
the United States, there are certain political concerns that have affected the major telecom
organizations like Huawei. The products of Chinese brands have a decline in the sales and
the production of various chipmakers has also slowed down, thus it affects the jobs in that
economy. In the sector of telecommunication, the majority part will be decreased as the
export of the items is also decreasing day by day (Gompert, Cevallos and Garafola
2016). It is assumed that there can be a recession in the recent period. There are several
industries who works for the biggest telecom organizations, and they also have the major
chipmakers in Singapore; due to the trade war, the supporting organizations will be shut
off.
The trade tensions between the United States and China have imposed several tariffs
by which Singapore is facing more problem and the organization is facing bans on the
products that Huawei has manufactured because of certain security concerns, who used to
be the biggest equipment maker in the telecom industry (Guo et al 2018).
2.3. Attracting financial investment

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From the trade war between the United States and China, the economy of Singapore is
taking a big hit as the stocks have become attractive if compared to the rest of Asia as
found in the report. The stock that is listed in the stock exchange has a strong dividend
yields, it does have a strong real estate investment trust sector with a stable currency; sue
to all these reasons the investors are more attracted to the equities of the Singapore
(Athukorala 2017). Though at the time of trade war between the world's largest two
economies i.e. Unites States and China, there are many tariffs that have been imposed on
many goods which have been faced at the time of importing and exporting the goods.
The currency of Singapore remains stable, as the central banks and the financial
regulator is being regulated by the Monetary Authority of Singapore, thus the investors
gets attracted and invest in it. The authority has control over the currency and can float
within the band against other currencies so that there are no wild fluctuations (Ariel,
Andrew and Rachel 2019). There are many offerings which have many safer investment
options, including that the investors have many opportunities so that they can see the
growth in the region of Southeast Asian region.
3. To highlight the serious concerns of the Singapore’s economy if there is
an escalation trade tension.
3.1. Slow demand in China
The economic growth of Singapore has been affected due to the trade war between the
United States and China, it has generally slow down and weaken the trading between
various countries. The freight of the airlines has been decreased due to the financial crisis
and the demand has also decreased. In the peak holiday season, the demand falls off the
air cargo, as per the data of the IATA. In October, the Asia-pacific and middle east region
faced the most decline (Tremewan 2016). China is declining in most of the product types

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and geographic partners, as the rest of the world has fallen by 5% during this recent year.
There is declining in consumer products which includes smartphones, cars and washing
machines. There are also similar declines in the traded goods which are mainly imported
from Japan and German, which is mainly made for the Chinese markets. The cost of
domestic goods is significantly more than the goods which are manufactured in their own
country. One of the reason, that is affecting more is the lack of liquidity of cash which is
restricting the ability to engage in international trade (Chiu 2018). Thus, it suffered many
losses at the time of exchanging currencies at the time of foreign trade.
3.2. Increase import tariff (indirectly)
The tariffs that have been imposed by the Government of the United States, both the
economy i.e. China and Singapore is seeking to roll back the tariffs which has amounted
to billions. There were certain negotiations which have been done with the administration
of the United States by the Government officials of Singapore (Asher 2017). Some of the
officials of Singapore have suggested to wave off some of the tariffs that have been
imposed by the United States. There were certain talks which have been done for the
removal of the tariffs on certain items like appliances, clothing and on gadgets (Yeung
2017). Both the Government of Singapore and China has also tried to meet the President
of the United States so that they can talk about the situation of the tariff imposing. Heng
Swee Keat, the Deputy Prime Minister of Singapore has also talked about their situation
of their economy to the Government of United States so that they certainly remove the
ban upon the products which they are manufacturing.
3.3. Regional recession
The Government of Singapore has stated that because of the issues like trade disputes
and tariffs, the world can face the problem with recession. The trade was started by the
President of the United States i.e. Donald Trump, as stated by the President of Singapore,

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it affects several industrial and supply chains and has affected the trade regime and the
global economic order. There was various financial pressure that Singapore has faced
which includes delisting the organizations of Singapore from the stock exchanges of the
United States (Lim 2015). Mr. Trump almost canceled several deals and has reported that
both China and Singapore is using unfair means at the time of trading and most of the
Chinese products were banned and because if this it affects both the economy of
Singapore and faced the period of recession period.
4. How the Singapore government should be responded the current
situations?
4.1. Expand regional markets
Singapore is trying to expand its business in the region of Asia-Pacific. The region is
full of expansion and has many opportunities in exploring foreign business. There are
many countries that are also interested and will also participate in the expansion. The
region of Asia-Pacific is known as “the most dynamic of the global economy”. There are
certain factors which will help at the time of developing the economy is the demographics
(Chen and Shao 2017). The organizations that will help in expanding should consider the
socio-economic matter of the economy so they can get help at the time of expansion. It is
very crucial for any organization to understand the market so that it will help in operating
and understand society as well. Though many foreign organizations faced some difficulty
as it is difficult to understand certain regional languages, cultures and business practices
(Huat 2016). Though there are several business leaders who will guide to overcome the
problems in the region of Asia-Pacific. There are many opportunities to expand as the
region is unique and it has its own particular area and its own business challenges (Yahya
2015). As the region is big, there are several marketing approaches that can be

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implemented at the time of expansion so that the economy can know about the
organization.
4.2. Technological innovation
In focusing on the technology innovation Singapore has established itself to be an
entrepreneurship hub and global innovation. There should be implications of the
advanced technologies and innovation, that will help in the assistance of the Asia-Pacific
region. There are organizations that manufacture high-end products which will help in the
development in the future (Findlay and Garnaut 2017). In the past, Singapore has proved
itself in doing business and has ranked at the top which has been stated by the World
Bank. In the sector of IP protection, Singapore has ranked fourth in the world as per the
report of Economic Forum’s Global Competitiveness (Arora et al 2019). The Government
of Singapore has invested in the nation’s science and technology research budget, that
will support the economic transformation of Singapore. This will also help in upgrading
the existing industries and will also help in expanding and growth of the new areas
(Woods 2018). Several domains have been made so that they will help in expansion.
There are major four areas of the key domains for which the funding is to be done:
 Advanced Manufacturing and Engineering – It will help in the development of
technological capabilities which will help in reinforcing the growth and
competitiveness in the sectors of manufacturing and engineering.
 Health and Biomedical Sciences – Through this domain, it will help in pursuing
research excellence and several applications related to the leverage on the human
health and wellness.
 Services and Digital Economy – By utilizing the digital capabilities of Singapore,
it can meet the national priorities, raise the level of productivity and the key
services can be improved.

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 Urban Solutions and Sustainability – With the help of integrated solutions, there
can be developed for a sustainable and livable city.
4.3. Strong digital capabilities
The economy of Singapore has been built on strong digital capabilities, that help the
economy is growing and will benefit them in the long term. There were several
committees that have been made with certain motives and initiatives that will help in
accelerating the adoption (Rodan 2016). With the help of Digitalization, there were many
areas through which the economy can explore and help in developing them. This will help
the brand of Singapore in building their trust and efficiency.
5. Conclusion
Upon the observations of Singapore's economic growth, it has been seen that it has
been affected due to the trade war between the United States and China. Though there are
certain implications which have been discussed in the report, through which the economy is
recovering their imbalances. There are many areas in which the organizations of the economy
of Singapore have been exhales, they have to focus on those areas and certainly, they will
overcome all the difficulties which have been faced because of the differences between the
two giant economies. As per the analysis, it will take time to regrow the economy, but as it is
considered as one of the dynamic economy it will succeed in keeping the sustaining of
Singapore’s economy

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6. Referencing
Ariel, T., Andrew, L. and Rachel, H. eds., 2019. Singapore Perspectives: Singapore.
World. World Scientific.
Arora, M., Raspall, F., Cheah, L. and Silva, A., 2019. Residential building material stocks
and component-level circularity: The case of Singapore. Journal of cleaner
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Asher, M.G., 2017. Some aspects of role of state in Singapore. In Singapore (pp. 3-25).
Routledge.
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.
Chen, X. and Shao, Y., 2017. Trade policies for a small open economy: The case of
Singapore. The World Economy, 40(11), pp.2500-2511.
Chiu, S.W.K., 2018. City states in the global economy: Industrial restructuring in Hong
Kong and Singapore. Routledge.
Findlay, C. and Garnaut, R., 2017. The political economy of manufacturing protection:
Experiences of ASEAN and Australia. Routledge.
Gompert, D.C., Cevallos, A.S. and Garafola, C.L., 2016. War with China: Thinking
through the unthinkable. Rand Corporation.
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.

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Huat, C.B., 2016. State-owned enterprises, state capitalism and social distribution in
Singapore. The Pacific Review, 29(4), pp.499-521.
Hughes, L. and Meckling, J., 2017. The politics of renewable energy trade: The US-China
solar dispute. Energy Policy, 105, pp.256-262.
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.
Lim, L.Y., 2015. Beyond gender: The impact of age, ethnicity, nationality and economic
growth on women in the Singapore economy. The Singapore Economic Review, 60(02),
p.1550020.
Noland, M., 2018. US trade policy in the Trump administration. Asian Economic Policy
Review, 13(2), pp.262-278.
Rodan, G., 2016. Capitalism, inequality and ideology in Singapore: New challenges for
the ruling party. Asian Studies Review, 40(2), pp.211-230.
Rodan, G., 2016. The political economy of Singapore's industrialization: national state
and international capital. Springer.
Tremewan, C., 2016. The political economy of social control in Singapore. Springer.
Woods, O., 2018. Spaces of the religious economy: Negotiating the regulation of
religious space in Singapore. Journal for the Scientific Study of Religion, 57(3), pp.531-
546.
Yahya, F. ed., 2015. Inequality in Singapore. World Scientific Publishing Company.
Yeung, H.W.C., 2017. The political economy of transnational corporations: a study of the
regionalization of Singaporean firms. In Singapore (pp. 57-84). Routledge.

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7. Appendix