李显龙拆解中美关税困局，新加坡能否成“避险港湾”？

Fourth, when you have tariffs and we say, "Well that is going to dampen growth and things are going to slow down and there will be fewer upsides", it is not just dampening growth. It is going to be very disruptive. If dampened growth means volume goes down, profits go down, maybe bonuses go down; well, I tighten my belt, I still got my job, both of us. Maybe over time, I can go and find another job. But if the supply chains are disrupted, if you get hit by 100% tariffs – companies in China are making Christmas trees for America for Christmas; 150% tariff – Christmas is not going to come. If you have got such a tariff on pharmaceuticals and semiconductors in Singapore, are we going to have Christmas or not? What it means is that industries can be disrupted. Businesses can be totally turned upside down. You may have the whole business model suddenly disappear and not just not hiring more people, but you may find yourself all of a sudden with a lot of surplus workers. How to look after them? And that can very quickly lead to recession – recession in the US itself, and impact elsewhere too. This is going to be a burden on businesses and consumers, on the global economy.

Fifth, with all these new tariffs – this is something which is going to last a very long time. It is not going to go away soon, because once you put in a tariff, once you protect your market, it is very difficult to take it away. People get used to it. Some companies may invest. You put in a tariff, you say, "Come invest in America". So I invest in America. It is really not competitive. You want to build Christmas trees in the US – it is very expensive, where to find workers? But after you have got the tariff and after the Christmas tree factory has come up, then you want to undo it. The factory says, “I am going to die, please help me". So you cannot undo it anymore. It is there. It is a reality. And furthermore, if you undo it, the party in opposition will say "But you see the Chinese have their tariffs still on, why am I disarming myself?” You have to negotiate with them – a further long process.

To go from where the Americans were, before the war, when they had high tariffs, to where they were by 2000 when the tariffs were one percent, nearly zero, that was a nearly 80-year process, gradually bringing things down. So now, if the tariffs go up, they stay up for a while. If you want to bring them back down, I think that is going to be a long process. It is not going to disappear. So that is going to be a long problem.

Impact on us, Singapore?

What is the impact on us? Immediately, the impact on us is – growth. This year, we were hoping for one to three percent growth. That was what we announced around Budget time. But with all this uncertainty in the world, MTI has revised the forecast. They have just put up the new forecast today; they put it down to zero to two percent. Do you know for sure? No. Could it be zero? Possible. Can it be negative? Will we have a recession this year? When we look at the numbers, we do not think so, but it could happen. And it could happen because, actually, you really do not know. You are not looking at whether consumers are ordering, whether demand is good, whether your product is improving, whether everyone is prospering. If I take an optimistic view – let's invest first. I think if I am fast, I will get something. What you do not know is what new policies are going to come. What are other countries going to do? Then, how will America re-retaliate? And you ask me to guess? It is impossible. So the uncertainty is very high, and is a problem, a problem in the short term. And as I explained earlier, in the medium to long term. So we must expect lower growth this year, a recession somewhere down the road, maybe not this year, but quite possibly at some point. And over the medium term, 5, 10 years, this is going to be a less friendly world that we are in.

So the difference between this time and previous crises is: previously you come out, you can come out into a world which is working and we fit in, we work again. This time, we are okay, but the world is not going to be okay, and we have to do our best to make sure that we look after ourselves in this much less hospitable world.

That is just on the economic side. On the geopolitical side, I do not want to go and talk a lot about it tonight, but you know about US-China. We know about the problems which are going to be worsened because of the trade war. So we must expect more US-China tensions, and therefore a less tranquil, less stable region. There will be more demands on us to work very hard, to be friends with both, and to find our own way forward without getting into trouble.

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