SINGAPORE TO BE EARLY CASUALTY?
US move can adversely affect city-state’s policy and currency
UNITED States President Donald Trump’s attack on washing machine imports may end up putting the Singapore dollar through the spin-cycle.
Economic growth in the Asian city-state has closely followed year-on-year changes in global trade volumes for almost 20 years as the nation handles the second-highest amount of containers in the world.
Any escalation of US protectionism, with Trump seen advocating his “America First” policies at Davos, could have an adverse reaction on investor expectations for Singapore’s growth, monetary policy and the local dollar.
“Singapore would be more adversely affected than other economies should the US step up protectionist policies,” said Hirofumi Suzuki, an economist at Sumitomo Mitsui Banking Corp.
“A drop in world trade volumes could damp speculation of monetary policy tightening and weigh on the Singapore dollar.”
Trump comes to the World Economic Forum with a rap sheet in the eyes of proponents of global trade. In his first year in office, he’s withdrawn the US from the Trans-Pacific Partnership (TPP) free trade deal and the Paris Agreement on climate change. He’s threatened to renege on the Iran nuclear deal, a free-trade agreement with South Korea, and the North American Free Trade Agreement.
The Singapore dollar is particularly exposed to investor expectations of future growth trends as the country’s central bank uses the currency as a monetary policy tool instead of interest rates. The local currency has risen about 1.6 per cent against the US dollar so far this year.
Meanwhile, the world’s political and corporate elite gathered in the Swiss ski resort of Davos delivered a robust defence of globalisation as US President Donald Trump slapped tariffs on imported solar panels and washing machines in his first major trade action.
The push-back also came as a group of 11 countries, including Japan and Canada, agreed to move forward on an Asia-Pacific trade pact that Trump withdrew last year. At the World Economic Forum in Davos, Canadian Prime Minister Justin Trudeau said the revised TPP would be “more progressive and stronger” for workers on intellectual property, culture and for the automotive industry. China also isn’t included.
“If we are going to push back against the anti-trade tendency in globalisation, that will leave us all worse off,” said Trudeau. “We have to put the concerns and the well-being of our ordinary citizens at the centre of what we are negotiating.”