Public policy expert Donald Low has called for a shift in Singapore’s economic model following the imposition of sweeping tariffs by the United States, cautioning against “apocalyptic pronouncements” and urging structural reforms that reduce the nation’s dependence on trade.
In a Facebook post on 6 April, Low described the tariffs as “a significant shock to the global trade system” and “perhaps a death blow for neoliberal globalisation.”
However, he said the impact would depend more on Singapore’s response than on the severity of the shock itself.
“As with other economic shocks, how we respond matters more. And I’m not talking about Singaporeans staying united,” wrote Low, who is Senior Lecturer and Professor of Practice at the Institute of Public Policy at the Hong Kong University of Science and Technology (HKUST).
His remarks follow Prime Minister Lawrence Wong’s national address on 4 April, in which Wong said Singapore must “brace itself for more shocks to come” and warned that “the global calm and stability that once existed will not return anytime soon.”
Wong described the US tariffs as a “seismic change in the global order”, adding that “we cannot expect that the rules which protected small states will still hold.”
He urged Singaporeans to remain united, vigilant, and mentally prepared, stating that the shift away from rules-based globalisation would leave smaller economies vulnerable.
Low did not dismiss the seriousness of the situation but shifted the focus to economic fundamentals. He highlighted that Singapore’s gross national income depends on three components: consumption, investment, and net exports.
“Singapore’s economy is unusual in that the share of net exports is extraordinarily high,” he said.
Despite running a trade deficit with the US, Singapore’s overall trade surplus exceeds 30 percent of GDP — “exceptionally high by global standards,” he noted. By contrast, China’s trade surplus is around 4 to 5 percent of GDP.
He warned that “it’s not the case that the larger the trade surpluses, the better,” arguing that Singapore should not aim to maintain excessively high external surpluses at the expense of domestic balance.
Low noted that while the US accounts for 11 percent of global imports, its GDP represents 27 percent of the global economy. As such, unless widespread protectionism follows, he believes global trade can be redirected through other markets.
He suggested that Singapore adopt a two-part response: “find new markets for our exports and restructure our economy so that it’s less export-dependent and more consumption-driven.”
Singapore’s total consumption — household and government combined — stands at just over 40 percent of GDP, compared to a global average of around 70 percent. “Boosting domestic consumption is an increasingly important hedge in a deglobalising world,” he said.
Low identified Singapore’s high national savings rate — above 50 percent of GDP — as a key factor behind low consumption. This is driven by government surpluses and household savings, much of which is allocated toward housing.
“Raising domestic consumption would require the government to run smaller fiscal surpluses and to reduce the need for Singaporeans to set aside so much of their incomes for housing,” he wrote.
Framing the US tariffs as a potential inflection point, Low said Singapore could respond in ways that make its economic model more balanced.
“As with the Covid-19 shock five years ago, the Trump tariffs are survivable,” he wrote. “Indeed, Singapore might even adapt and thrive by shifting to a growth model that is more ‘normal’.”
In a reply to political scientist Chong Ja Ian, Associate Professor at the National University of Singapore, Low acknowledged that retaliatory moves from other countries against the US could also affect Singapore’s position, particularly in terms of investment.
“FDI, especially from US firms, might fall,” he wrote. “But we’re not short of investible funds as our extraordinarily high savings rate shows. So instead of investing so much of that abroad, we can direct more of that domestically. We just have to be careful that these investments are not for speculative, unproductive things like real assets or domestic stocks.”
Responding to another comment on the impact of an ageing population on consumption, Low argued that older societies should in fact consume more.
“After all, the argument for high savings is that our population is ageing. So when it’s actually aged, we should spend some of those savings rather than accumulate ever more.”
When asked about Singapore’s growing services sector and whether the economy should pivot more toward services exports, Low replied, “Good point. I think our services exports are already as high as our goods exports.”
His remarks have drawn attention for reframing Singapore’s response as one that should be policy-driven rather than resilience-based.
While PM Wong highlighted national unity, institutional preparedness, and geopolitical caution, Low’s emphasis is on structural reform, particularly domestic demand stimulation and investment realignment.
The post US tariffs are a shock, but Singapore must adapt by boosting domestic demand and rethinking investments appeared first on The Online Citizen.
