Singapore Prime Minister Lawrence Wong has issued a stark warning about the unraveling global trade system. Following Donald Trump's sweeping new tariffs, Wong compared today’s fragmentation to pre–World War conditions.
He cautioned against rising protectionism and urged nations to avoid a return to economic nationalism.Markets remain volatile as global leaders grapple with the fallout from the U.S. trade shift.
#LawrenceWong #GlobalTradeCrisis #TrumpTariffs #Geopolitics #MarketVolatility #TradeWar2025
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He cautioned against rising protectionism and urged nations to avoid a return to economic nationalism.Markets remain volatile as global leaders grapple with the fallout from the U.S. trade shift.
#LawrenceWong #GlobalTradeCrisis #TrumpTariffs #Geopolitics #MarketVolatility #TradeWar2025
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NewsTranscript
00:00Mr. Speaker, we have known for some time that the world is in flux.
00:17The familiar signposts are fading, but the contours of a new global system have yet to
00:22take shape.
00:22So, we are in a period of transition – uncertain, unsettled, and increasingly unstable.
00:33The recent Liberation Day tariff announcements by the U.S. confirms this stark reality.
00:39The era of rules-based globalisation and free trade is over.
00:45This marks a profound turning point.
00:48We are entering a new phase in global affairs – one that is more arbitrary, protectionist
00:55and dangerous.
01:00For nearly 80 years since the end of World War II, America was the anchor for the free
01:05market economies of the world.
01:07It championed free trade and open markets and led efforts to build a multilateral trading system.
01:14This WTO system ushered in decades of global growth and stability.
01:19It allowed trade to flourish and lifted millions out of poverty.
01:23It benefited the world and contributed to America's own economic strength.
01:30And objectively, America continues to enjoy unrivaled economic heft.
01:36In fact, the U.S. rebounded more quickly than other advanced economies from the COVID pandemic.
01:42It has surged ahead of all its major competitors in the advanced industrial world.
01:48But not all Americans feel this way about their economy.
01:52There are hollowed-out towns in what was once America's thriving industrial belt.
01:57There are workers whose jobs have disappeared and whose incomes have stagnated.
02:01They believe that the American economy is fundamentally broken.
02:07Discontent was already visible in the 1990s when protesters disrupted the WTO meeting in
02:14Seattle.
02:16Frustrations deepened following the global financial crisis of 2008 and more recently
02:21after the COVID pandemic.
02:25To be clear, the global economic system is in need of reform.
02:29Singapore and many others have called for changes.
02:32And we have been working with like-minded countries and partners at the WTO to reform its processes.
02:39A key concern in America is China.
02:42The sense that the U.S. had given away too much in allowing China to join the WTO and
02:47that China competes on an unfair basis, for example, by heavily subsidizing its own companies,
02:54putting up non-tariff barriers and restricting market access to U.S. firms.
03:01These concerns should be addressed within the WTO framework.
03:05In particular, the trade arrangements and concessions made in the past when China was
03:09only 5% of the world's economy should be updated when China now makes up 15% of the
03:16world's GDP.
03:18And if there are disagreements, they should be resolved through the WTO's dispute settlement
03:24system which has been paralyzed and urgently needs to be restored and reformed.
03:32But what the U.S. is doing now is not reform.
03:37It is rejecting the very system it created.
03:41The U.S. has imposed a blanket 10% tariff on imports for nearly all countries.
03:47On top of that, it has layered on higher tariffs, up to 50% for selected countries, especially
03:53those that run a trade surplus with the U.S.
03:58According to the administration, the sweeping tariffs are needed to fix America's trade imbalances.
04:05But there is nothing inherently wrong about running a trade deficit.
04:09It simply means that American consumers are buying more from the world than the world is
04:14buying from America.
04:16Moreover, the focus has been solely on the goods trade.
04:22That only gives a partial picture.
04:24In fact, the U.S. runs a surplus with many of its trading partners in services, exporting
04:30software services, education, entertainment, financial and business services.
04:36But this fact has been completely ignored.
04:40In Singapore's case, we have an FTA with America.
04:44We impose zero tariffs on U.S. imports and we actually run a trade deficit with the U.S.,
04:50meaning we buy more from them than they do from us.
04:56If the tariffs were truly reciprocal and if they were meant to target only those with trade
05:01surpluses, then the tariffs for Singapore should be zero.
05:07But still, we are being subjected to the 10% tariff.
05:12We are very disappointed by the U.S. move, especially considering the deep and long-standing
05:17friendship between our two countries.
05:22These are not actions one does to a friend.
05:28Asia bears the brunt of the U.S. tariff increase.
05:32Within the region, China is the hardest hit, facing a 34% tariff this round.
05:38And this is on top of the 20% tariff increase imposed over the last two months and the 20%
05:44from the first Trump administration.
05:46So taken together, the average U.S. tariff on Chinese products now exceeds 60%.
05:53In Southeast Asia, the tariff rates range from 10% to 49%.
05:59These measures will accelerate the fracturing of the global economy.
06:04Instead of flowing based on economic efficiency, capital and trade will increasingly be diverted
06:11based on political alignment and strategic considerations.
06:17Our members have asked about the impact of the tariffs on specific industries in Singapore.
06:23We are assessing the situation carefully.
06:26But our deeper worry is not the direct impact that these businesses face.
06:31It is the wider implications for the global trading system and the world economy.
06:36So let me explain.
06:38First, the reciprocal tariffs are a fundamental rejection of the WTO rules.
06:46One of the cornerstones of the WTO multilateral trading system is the Most Favoured Nation Principle,
06:52or MFN.
06:54Most favoured nation sounds like giving special privileges.
06:59Actually, it means the opposite, that every member must treat all other members equally.
07:07In other words, if a country extends more favourable terms or imposes additional restrictions to
07:13one trading partner, it must do the same to all other WTO members.
07:19There are some carve-outs and exceptions to the MFN rule, for example, to allow free trade agreements.
07:25But MFN has long been the bedrock of the multilateral trading system.
07:31It ensures a level playing field, prevents discrimination and enables countries, big or small, to compete
07:38fairly in global markets.
07:41This has helped to liberalise trade amongst more than 100 WTO members, each with different
07:46economic and political and social concerns.
07:52America's new tariff regime is a complete repudiation of the MFN principle.
07:58It opens the door to selective country-by-country trade relations based on unilateral preferences.
08:07If other countries adopt the same approach as the US, the rules-based trading system will
08:12unravel.
08:14This will spell trouble for all nations.
08:16But smaller countries, like Singapore, will face greater pressures.
08:21Small countries have limited bargaining power in one-on-one bilateral negotiations.
08:27So the major powers will take the terms, and we risk being marginalised and sidelined.
08:35Second, the likelihood of a full-blown global trade war is growing.
08:44Singapore has decided not to impose retaliatory tariffs.
08:47Doing so will only lead to increased costs for Singaporeans.
08:53But other countries may not be guided by the same considerations and may have different
08:59perceptions and views.
09:02China has already imposed retaliatory tariffs on US goods.
09:07Others, like the European Union, are considering their next steps.
09:14Meaning that the new tariffs are a negotiating tactic, a negotiating tool by the US to extract
09:20concessions in other areas.
09:24This was what President Richard Nixon did in 1971.
09:28He slapped the 10% surcharge on imports to pressure Germany and Japan to devalue their currencies.
09:34Even when they did, the tariffs came off.
09:38Indeed, there is a brief window for countries to negotiate and get some reprieve from the
09:43US before the higher tariffs take effect.
09:46And it may be possible for some rates to be lowered.
09:51But we have to be realistic.
09:53Once trade barriers go up, they tend to stay up.
09:57Bringing them back is much harder, even after the original rationale no longer applies.
10:06Even if some partial accommodations are eventually worked out, the uncertainty generated by such
10:13a drastic move will dampen global confidence and growth.
10:18It will be very hard to restore the previous status quo.
10:23And in particular, it does not look like the 10% universal rate is open for negotiation.
10:29This seems to be the fixed minimum tariff, regardless of a country's trade balance or
10:34existing trade arrangements.
10:37Furthermore, there are other forces that could maintain the momentum for tariffs.
10:43In particular, many European countries are eager to protect their critical industries
10:48like electric vehicles, green technologies and semiconductors from Chinese competition.
10:56They do not want to be a dumping ground for exports from China or other countries.
11:02There is also a growing push across the West to strengthen their domestic manufacturing capabilities
11:08and to reduce dependence on global supply chains, especially in strategic industries.
11:17So this round of tariff increases by the U.S. may just be the beginning of more increases
11:23to come globally.
11:26And we have seen this play out before.
11:29The U.S. enacted sweeping tariff increases through the Smooth-Hawley Act in 1930.
11:34Many countries protested and a number retaliated with their own trade restrictions and tariffs.
11:39This deepened and extended the Great Depression.
11:45In some ways, today's risk may be greater.
11:48The new U.S. tariffs, if fully connected, are higher than the ones in Smooth-Hawley.
11:54Trade is now a much bigger part of the American and global economy compared to the 1930s.
12:00Supply chains are also more deeply connected than they were back then.
12:05Any disruption to trade flows will have wider knock-on effects on the world.
12:12This brings me to the third point, which is the impact on the global economy.
12:19Business and consumer confidence has already been hit by the tariffs.
12:24International trade and investments will suffer.
12:27Our economic agencies got in touch with several multinational enterprises and local businesses
12:33after the tariff announcement.
12:36Even those who were not directly affected by the tariffs are worried about weakening demand
12:41from their consumers.
12:44Some have put new projects on hold while they assessed the full implications of the tariffs.
12:52These are reactions from companies based here.
12:55But I'm sure the same conversations are happening in boardrooms elsewhere.
13:08Over the recent days, we have seen sharp negative reactions in global stock markets.
13:15It is too early to tell if all this will spill over into the real economy.
13:20But the downside risks are clearly rising.
13:24What's troubling is not just the tariffs themselves, which are already damaging, but the fact that
13:29this new wave of protectionism is unpredictable and unstable.
13:35Protectionism is already bad.
13:37Unstable protectionism is even worse.
13:41Businesses don't know what to expect.
13:44Many are holding back, fearful that changing rules will leave them with stranded assets.
13:49And all this creates an environment of deep uncertainty, one that could tip both the U.S.
13:55and global economy into recession.
13:59The consequences extend far beyond economics.
14:02More and more countries are turning away from win-win cooperation and deeper integration.
14:08Instead, we see a rising, me-first, win-lose mindset, where it's every country for itself.
14:16Some are even prepared to use aggressive or coercive means to get what they want at the expense of others.
14:24Meanwhile, global institutions are getting weaker and long-standing norms of cooperation are breaking down.
14:34One major concern is the U.S.-China relationship.
14:38America views China as a strategic competitor and threat, which must be dealt with now while America still has the advantage.
14:47China says it is ready for a tariff war, a trade war or any other type of war.
14:54The U.S. has now threatened an extra 50% tariff on China, and China says it will fight to the end.
15:02There are fewer channels for dialogue, which can serve as guardrails to manage the relationship.
15:09So if the disputes escalate and destabilize U.S.-China relationship, the consequences for the world would be disastrous.
15:20We must be mentally prepared.
15:22The predictable and rules-based order we once knew is fading.
15:26The new era will be more volatile with more frequent and unpredictable shocks.
15:32We must be ready to stand firm and protect our interests, no matter how the external winds may blow.
15:41What does all this mean for Singapore?
15:44In the near term, we expect weaker global growth, which means external demand for our goods and services will fall.
15:53The outward-oriented sectors of our economy will suffer the brunt of the impact.
15:58They include manufacturing, especially segments like electronics and semiconductors,
16:05biomedical science, which have higher export exposure to the U.S.,
16:10wholesale trade and transport will be impacted.
16:15The global uncertainty and dampened sentiments will also impact some services industries,
16:20including finance and insurance.
16:24Singapore may or may not go into recession this year, but I have no doubt that our growth will be significantly impacted.
16:32We had originally projected GDP growth of 1 to 3 percent for 2025.
16:38MTI is reassessing the growth forecast and will likely revise it downwards.
16:45Slower growth will mean fewer job opportunities and smaller wage increases for workers.
16:51And if more companies face difficulties or relocate their operations back to the U.S.,
16:57there will be higher retrenchments and job losses.
17:02For now, the measures announced in this year's budget will provide support for any short-term strain.
17:09We have a comprehensive package of measures for households and individuals.
17:13They will receive CDC vouchers, SG60 vouchers and USAFE rebates to help with their cost of living.
17:19And there are targeted measures like increased ComCare assistance for the more vulnerable groups.
17:27We are also supporting workers through investments in SkillsFuture.
17:31And those who find themselves involuntarily unemployed will receive help to get back on their feet
17:36through the SkillsFuture job seeker support, which will start later this month.
17:43We have also rolled out measures in the budget to help businesses.
17:46There are short-term support measures through corporate income tax rebates,
17:50as well as schemes to boost their productivity and competitiveness and to pivot to new markets.
17:57Our economic agencies are also engaging the firms impacted by the tariffs to better understand their responses
18:04and see how we can support them and assist them with any specific issues they face.
18:10Nevertheless, the situation is fluid and can change quickly.
18:16We will therefore set up a task force chaired by DPM Gan Kim Yong to help businesses and workers address the immediate uncertainties,
18:25strengthen their resilience and better adapt to the new economic environment.
18:32In addition to our economic agencies, the task force will include the Singapore Business Federation,
18:37the Singapore National Employers Federation and the NTUC.
18:43We will continue to monitor developments closely.
18:47The Government stands ready to do more if and when necessary.
18:52We have the resources to do so because of the financial discipline and prudence we have exercised over the decades.
19:03In this new environment, Singapore must redouble our efforts to remain a key node in global flows and a trusted business hub.
19:12We will forge closer links with like-minded partners who share our commitment to open and free trade.
19:21The U.S. may have decided to turn protectionist, but the rest of the world does not have to follow the same path.
19:29We will identify other partners to join us and work around this to ensure resilience and maintain critical parts of the multilateral system while laying the foundations for a possible new and different global system that can be achievable later.
19:47This is why I have made the effort to engage and visit my counterparts in different countries.
19:52I touched base with the U.K. Prime Minister Keir Starmer yesterday and have a few more conversations lined up in the coming weeks.
20:00They are all keen to do more with Singapore and to expand our economic cooperation, including in new areas like the digital and green economies.
20:13In particular, we will strengthen our collaboration and integration within ASEAN.
20:19Last Friday, I spoke with Malaysian Prime Minister Anwar Ibrahim.
20:24Malaysia is also the ASEAN Chair this year.
20:27We agreed to accelerate ASEAN's integration efforts to make our region more attractive and competitive.
20:34A special ASEAN Economic Minister's meeting will be convened later this week.
20:40They will discuss further ways that ASEAN can work together to strengthen intra-ASEAN trade
20:46and to send a strong signal of ASEAN's commitment to regional economic integration.
20:53As a group, ASEAN will also continue to strengthen our links with like-minded partners in areas of mutual interest.
21:01Thank you, Mr. Speaker.
21:05Mr. Speaker, we are entering a changed world.
21:08The only way Singapore can make it through the gathering storm is to stay united,
21:14pool our resources, our resilience and our resolve.
21:20The Government will do everything we can to steer Singapore through the choppy waters and make sure no one is left behind.
21:27We will keep our economy open, our society cohesive and our institutions strong.
21:34We will create new value propositions for businesses and investors.
21:39We will act boldly and decisively when needed to ensure Singapore continues to succeed.
21:46Above all, we will put the interests of Singapore and Singaporeans at the centre of everything we do.
21:54The road ahead will be harder. The dangers are real. But so too is our determination.
22:03In many ways, we are in a better position than we were 60 years ago when we became independent.
22:10We have built deep reserves as a strategic buffer.
22:15We have forged a strong compact built on solidarity and trust in each other.
22:20And most of all, we have our ingenuity and wit, our grit and gumption,
22:26a never-say-die spirit that has seen us through every crisis and will carry us through the ones to come.
22:33So, Mr Speaker, I say to this House and to fellow Singaporeans, do not fear.
22:41Now, more than ever, we will stay resolute and united.
22:46Our little red dot will continue to shine.
22:50In a dark and troubled world, Singapore will hold our ground as a beacon of stability, purpose and hope.
22:58Thank you, sir.
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