A new 10% US tariff on Singapore applies to over half of Singapore’s exports to the United States. This may seem manageable on paper but it’s a big deal for small and medium enterprises (SMEs), which account for 99% of all enterprises in Singapore.
Even companies that don’t export directly could feel the impact. Keep on reading to further understand the tariff’s impact on businesses.
What SMEs Need to Know About the Current Tariff Landscape
Singapore’s trade with the U.S. is facing big changes. A 10% Singapore export tariff rate now applies to many Singapore exports, yes, but things are a lot more complex than they seem.
Right now:
- 5% of SG’s exports to the U.S., including steel, aluminium, and car parts, face higher tariffs of 25%
- 40% of exports like semiconductors, electronics, medicine and energy products are still exempt but that could change soon
The Monetary Authority of Singapore has warned that the U.S. is reviewing these exempt items for national security reasons. New tariffs could be introduced in the coming months, disrupting businesses that currently are not affected.
The United States is Singapore’s second-largest export market, making up 11% of exports in 2024 — a share that would be hard to replace.
The notion that “exempted” means “safe” is a dangerous misconception. Senior Minister Lee Hsien Loong put it plainly: “In trade policy, economic policy, once you make a move, you can’t take it back. There are consequences.”
Tariffs create long-term impacts that businesses must always prepare for.
Are You at Risk?
The SMEs are highly vulnerable to the impact of U.S. tariffs on Singapore. As economic adviser Song Seng Wun of CGS International Securities Singapore puts it: “Every big or small country that is hit by tariffs, Singapore is watching. Ultimately Singapore is looking at external demand and trade flows through its ports, to support economic growth and jobs creation.”
Your initial step
The first step for SMEs is to check for direct exposure:
- Do you export directly to the U.S.?
- What tariff categories apply to your products?
- How much room do you have in your profit margins to absorb extra costs?
But that’s just the beginning.
You also need to understand your supply chain exposure:
- Which of your customers sells to the U.S.?
- Are any of your suppliers affected by tariffs?
- What is your connection to China, Singapore’s largest export market?
Indirect impacts may be even more damaging than direct ones.
Singapore often export parts and services to China and other countries, which are used in products that go to the U.S. So, if China’s exports to the U.S. drop due to tariffs, Singapore’s exports to China also decline. These ripple effects spread across ASEAN, where Singapore is a key trade and production hub.
SMEs are financially more vulnerable than large firms. They have less buffer for rising costs, weaker bargaining power, and are more affected by uncertainty. As Ang Yuit, president of the Association of Small and Medium Enterprises, warns:
- “Some cases, they will find that demand goes away as their customers upstream are affected.”
What’s Already Happening
The theoretical has already become intangible. Global companies like UPS and Hasbro have announced job cuts as tariffs raise shipping costs to the US, providing a preview of what Singapore’s SMEs might face. The squeeze on export margins that MAS describes as akin to a “production tax” forces companies to make difficult decisions about production levels, employment and investment.
Cost pressures are mounting across the board. SMEs report increasing difficulty in passing costs to customers, who are themselves grappling with tariff impacts. The complexity of supply chain disruptions adds another layer of challenge. As Mr. Ang notes, “The decision-making process has many layers, from the cost of setting up a new plan in another country, to the different components that finally make up the finished good.” While tariff rates have been announced, the real work of restructuring supply chains has just begun.
Demand uncertainty compounds these challenges. Consumer confidence is declining amid the broader economic uncertainty, with Morningstar’s director of Asia equity research, Lorraine Tan, warning that “consumer confidence is likely to be lacklustre given these uncertainties, and this could weigh on Singapore’s economic growth.” B2B customers are reducing orders, and investment decisions across industries are being put on hold as businesses wait to see how the situation develops.
What Help is Available
Recognising the severity of the challenge, the government has mobilised support mechanisms. The Business Adaptation Grant, launching by October 2025, offers up to S$100,000 per company with higher support levels specifically for SMEs. While this requires co-funding from businesses, it represents a significant commitment to helping companies adjust to the new tariff environment.
The Singapore Business Federation is spearheading trade diversification initiatives, organising business missions to Thailand, Egypt, India, Saudi Arabia, and Mexico in the coming months. Chief executive Kok Ping Soon emphasises the strategic importance of these efforts: “The varied tariff landscape across Asia underscores the urgent need for businesses to acquire fluency in customs data and trade compliance issues, such as the basis for rules of origin and customs evaluation methods.”
These missions leverage Singapore’s extensive network of free trade agreements, offering SMEs pathways to new markets that might offset US market losses. The focus on skills and knowledge support—including training in customs data fluency, trade compliance education, rules of origin expertise, and customs evaluation methods—addresses the technical capabilities SMEs need to navigate this complex new landscape.
Strategic Response Framework for SMEs
In the immediate term (the next three months), SMEs must conduct comprehensive risk assessments. This means calculating exact tariff exposure, mapping supply chain vulnerabilities, and stress-testing cash flow under various scenarios. Customer communication becomes critical; businesses need to engage US customers on cost-sharing arrangements, explore contract renegotiations, and meticulously document all tariff-related cost increases for future discussions.
Supplier diversification cannot wait. Even as businesses evaluate the costs versus risks of change, they should begin pilot programs with alternative suppliers. The medium-term horizon of three to twelve months demands more structural adaptations. Market diversification becomes essential, with SMEs needing to research opportunities in FTA partner countries, participate in government trade missions, and develop concrete market entry strategies.
Operational efficiency gains new urgency. Streamlining processes to reduce costs, investing in automation where feasible, and optimising inventory management can provide the margin buffer that tariffs have eroded. Financial planning must be proactive—applying for the Business Adaptation Grant, securing additional credit facilities, and building cash reserves for continued uncertainty.
The long-term strategic shifts required over one to three years may fundamentally reshape many SMEs. Business model evolution might include manufacturing relocation, development of higher-value services, or building more resilient supply chain networks. Partnership strategies offer another avenue for adaptation, whether through forming consortia with other SMEs, exploring joint ventures in new markets, or developing strategic alliances that provide scale and resources individual SMEs lack.
Turning Challenge into Opportunity
The tariff landscape of 2025 represents a fundamental shift in how SMEs in Singapore must operate. While the challenges are real and substantial, so too are the resources and resilience available to address them.
The businesses that recognise this moment as a catalyst for transformation rather than simply a crisis to endure will be those that emerge stronger on the other side. The time for assessment and action is now—because in this new world of permanent tariffs, standing still is not an option.
And as you navigate these unprecedented changes, professional guidance becomes invaluable. Turn to accounting services to help model financial strategies and ensure compliance with evolving trade regulations.
