Southeast Asia Faces U.S. Tariff Shocks: Singapore and Indonesia Respond

The reintroduction of U.S. tariffs under President Donald Trump in 2025 has shaken key Southeast Asian economies, with Singapore and Indonesia taking different—but urgent—steps to manage the fallout.

Singapore: Indirect Pressure, Direct Consequences

Singapore, a highly globalized trading hub, is particularly exposed to the 10% baseline tariff the U.S. imposed on all imports. Around 55% of its domestic exports to the U.S. are now affected, with an additional 5% facing higher tariffs, especially in steel, aluminium, and automotive parts. While about 40% of exports—including semiconductors, pharmaceuticals, and electronics—are temporarily exempt, these exemptions are under review.

As the U.S. is Singapore’s second-largest export market (11% of domestic exports), and as Singapore is a key supplier of intermediate goods to countries like China, the impact is also indirect. When Chinese exports to the U.S. fall, so does demand for Singapore’s inputs. The Monetary Authority of Singapore (MAS) describes the tariffs as a “production tax” that shrinks profit margins, reduces output, and dampens overall economic activity.

In response, the Ministry of Trade and Industry (MTI) has downgraded 2025 GDP growth to 0–2%, citing weakened global trade and investor sentiment. MAS has eased monetary policy for the second time, hoping to cushion the blow. In Q1 2025, Singapore’s economy grew by 3.8%, down from 5%, and contracted 0.8% on a quarterly basis.

Looking forward, sectors like manufacturing, wholesale trade, transport, and finance are most vulnerable. A national task force has been formed to support affected businesses and workers. Prime Minister Lawrence Wong warned that the era of rules-based globalisation is ending, and Singapore must quickly evolve its trade strategy to remain competitive.

Indonesia: Direct Hit, Diplomatic Response

Indonesia received a more targeted blow. The U.S. imposed a 32% tariff on its exports, citing a large trade surplus (US$16.8 billion in 2024) and unequal market access. Key export sectors—electronics, footwear, and apparel, collectively worth over US$7 billion—are now under pressure. U.S. officials also criticized Indonesia’s local content rules and complex import regulations, increasing bilateral trade tensions.

Instead of retaliating, Indonesia has chosen diplomatic engagement. A 90-day tariff suspension announced by the U.S. on April 9 opened space for talks. Indonesia responded by reducing certain tariffs and sent a high-level delegation to Washington to negotiate. Finance Minister Sri Mulyani estimates that tariffs could trim 0.3–0.5 percentage points from GDP growth if fully implemented.

Domestically, Bank Indonesia has held its benchmark interest rate at 5.50%, after three cuts since September. Inflation remains low at 1.6%, but loan growth has slowed, reflecting cautious consumer and business sentiment. A US$1.5 billion stimulus package, including transport subsidies and direct aid, aims to boost domestic demand in the short term.

Longer-term, Indonesia is pushing for structural reforms. These include expanding trade with under-tapped markets like Africa and South America, digitalizing MSMEs, lowering investment barriers, and investing in trade infrastructure like ports and toll roads. The government also aims to raise its tax-to-GDP ratio to 12% by 2025 to strengthen fiscal resilience.

Turning a Trade Shock into Opportunity

While both countries are navigating different types of exposure, the underlying threat is shared: a shift toward global protectionism. Singapore faces disruption through supply chains and global investor caution, while Indonesia must manage direct tariff losses and structural trade imbalances.

Yet, both economies are using this moment to rethink and recalibrate. Singapore is reinforcing supply chain agility and exploring policy support for vulnerable sectors, while Indonesia is accelerating reforms and diversifying trade ties. As the 90-day tariff pause counts down, both governments are racing to secure new economic footholds in a world that increasingly favors resilience over openness.