SM Lee: Current crisis different as S'pore can no longer rely on stable external environment to help us overcome past crises

Is the Singapore government's response to the Trump's tariffs overblown? How concerned should Singaporeans be?

Senior Minister Lee Hsien Loong said that Singaporeans do "need to be concerned" and understand what it means for Singapore.

The reason, he added, is because something important is different this time as compared to other crises that Singapore had overcome in the past.

A stable external environment, such as a working global trading system, is no longer a given, PM Lee told the union leaders on Apr. 14 evening.

The dialogue were attended by NTUC president K. Thanaletchimi, secretary-general Ng Chee Meng and other union leaders.

Two important things that helped Singapore overcome crises in the past

Be it the 1997 Asian financial crisis, SARS, 2008 financial crisis or Covid-19, Singapore had two big things that were going in our favour in previous crises, SM Lee said.

Firstly, Singapore was able to get united and "get our act together" with the right policies, "even the painful ones", and get the system sorted out.

Secondly, Singapore was part of a working global trading system, which promoted free flow of trade and investments.

"We were efficient. We were doing well. We came out from trouble, we plugged back in. We could resume growing, resume developing and resume succeeding," SM Lee said.

SM Lee attributed the presence of a global financial system, a WTO (World Trade Organisation) system, for our ability to recover from past crises.

This system levelled the playing field for big and small countries with rules that enabled Singapore to gain market access, investment and jobs.

"What it means is that for small countries who have very little bargaining power, because the rules are like that so we enjoy the same market access which big countries enjoy, and we benefit from the bargaining power of bigger countries. And therefore, we can get access, and therefore, we can get investments, and therefore we can get jobs."

However, what the US is currently dismantling this very system that's critical to Singapore's success as a small country.

The US is exploiting its bargaining power, as they account for a quarter of global GDP, SM Lee said.

Fundamentally, the US's approach is not win-win but a win-lose and this has "very major implications" for Singapore.

Major implications to Singapore

Firstly, we can expect the US to apply different rules for different countries, so small countries like Singapore will suffer because we have no bargaining power.

However, even big countries will not do well, SM Lee cautioned, because of the uncertainties and confusion caused by the differences in rules.

There will be far fewer opportunities to trade, invest and do business together, SM Lee added.

Secondly, the tariffs will choke off trade, raise costs and dampen growth.

Once the tariffs hit pharmaceutical and semiconductor industries, the tariffs will "potentially hit Singapore quite hard" as these are a significant part of our economy, SM Lee warned.

The impact of tariffs will worsen when countries retaliate.

SM Lee also explained how tariffs not just dampen growth but also caused a supply chain disruption, leading to a potential recession.

"Companies in China are making Christmas trees for America for Christmas. 150% tariff, Christmas is not going to come. If you've got such a tariff on pharmaceuticals or semiconductors in Singapore, are we going to have Christmas time? So what it means is that industries can be disrupted. Business 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 a lot of surplus workers wondering how to look after them, and that act can very quickly lead to recessions, recession in the US itself and impact elsewhere too."

So will Singapore have a recession this year?

"If you look at the numbers, we don't think so, but it could happen. And it could happen because, actually you really don't know." SM Lee answered.

This is because we can no longer look at indicators such as the volumes of orders that companies receive or if products are improving.

What you don't know is what new policies are going to come.

"We have to do our best to make sure that we look after ourselves in this much less hospitable world," SM Lee said.

How Singapore navigate this period of uncertainties domestically

On the international front, this means to continue to support free trade and try to keep the global trading system going.

On the domestic front, the government will support households and businesses with various forms of assistance, such as the Job Support Scheme to help workers who are displaced.

The government has also set up an economic resilience taskforce to help Singapore navigate through the uncertainties and help businesses transform.

SM Lee also urged Singaporeans to be psychologically prepared for a more troubled world, stay united and look after one another during this period.

Need for stable politics

SM Lee also highlighted the importance of a strong domestic support for Prime Minister Lawrence Wong so that Singapore can be strong internationally.

"If they know you have strong support, good support, they know you are in touch with the population and you have got your domestic issues well under control, then they take you seriously," SM Lee explained why Singaporeans' support for PM Wong is important for Singapore.

Stable and good politics is a big factor to how international businesses and family offices see Singapore as a safe haven, he added.

While SM Lee accepts the fact that Singaporeans want more opposition MPs as a stronger check and balance to the People's Action Party, Singapore needs an effective government system, led by a good and able ruling party, and that depends on the election outcomes, he said.

SM Lee described his evening speech on Monday as "sober", but said it was his duty to "share things as they are", directly, candidly and honestly.

"We can go into battle with confidence. We have the resources, we have the experience – we are ready. We've done it before, and we'll show the world that we can do it again," he said.

"The upcoming elections will be crucial. It's a changed world, we have a fresh team in charge, and we will have a new resolve to tackle the challenges and to emerge stronger.

PM Lawrence (Wong) is leading the PAP into elections for the first time, seeking his own mandate to take Singapore forward – forward through this crisis, forward with their plans, forward for our future."

Top image from MDDI.