Singapore’s MAS warns of ‘disastrous’ effect of trade conflicts

The global economy will face “disastrous consequences” if US protectionist measures proposed by incoming President Donald Trump prompt trade wars, the head of Singapore’s central bank said.

Some of the possible actions – such as rejecting a US-Pacific trade deal, extra taxes on US importers and labeling major trade partners as currency manipulators – “may well attract retaliatory measures,” Ravi Menon, managing director of the Monetary Authority of Singapore (MAS), said in a speech at a local conference on Monday.

But in all likelihood, the outcome “may not be that bad” since there’s still uncertainty around Trump’s policies and support for free trade remains strong among the US establishment, he said.

Export-reliant Singapore is among the biggest losers from a slump in trade, with the economy probably recording its worst performance last year since the 2009 global financial crisis. Officials have vowed to push ahead with the Trans-Pacific Partnership, a free-trade pact signed between 12 countries including the US, Japan, and Singapore. Trump pledged on the campaign trail to withdraw from the deal when he takes office.

While there is optimism about a US fiscal boost and concern about a trade backlash, “there remains considerable uncertainty as to the actual policy changes in store,” Menon said. “They may not pan out as expected.”

Singapore is expected to continue a modest pace of expansion, with authorities forecasting growth of 1 percent to 3 percent for this year, Menon said. Trade-oriented industries should benefit from a mild upturn in global and regional electronics, he said.

Still, the economy won’t be immune to higher US interest rates, volatility in capital flows, and “potential stresses in the regional corporate sector,” he said.