DBS: These Singapore companies could be hit by US-China trade war

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If the tit-for-tat trade tensions between the U.S. and China escalate, some Singapore companies could get caught in the crossfire, DBS said in an note on Tuesday.

It noted that the U.S. hit China with plans to impose US$50 billion in tariffs on Chinese exporters and that China retaliated with tariffs on US$3 billion on U.S. products.

“The concern is that the current ‘skirmish’ could drag on with tit-for-tat moves till the U.S. mid-term election in November or worsen into a trade war involving multiple nations,” DBS said. “An escalation of U.S.-China trade war is negative for the global economy, including Singapore.”

Cloudy outlook?

DBS added that the U.S. tariffs on Chinese goods were also negative for Singaporean manufacturers with operations in China and end-product destinations in the U.S., making order visibility “cloudier.”

It noted that Hi-P has nine manufacturing facilities, with six in China. Sunningdale may be less affected as it has 16 global facilities, with six in China and one in the U.S.

“Still, the final impact is hard to pin down because the current trade skirmish is a developing story that could turn either way,” DBS said, adding “It is hard to determine what percentage of their customers’ end-products is shipped to the U.S.”

But it added that the impact on Venture would likely be limited as its operations are spread across the U.S., Europe, China, Malaysia and Singapore. It noted UMS has no manufacturing facilities in China.

Silver lining?

But DBS noted that the Trump administration’s focus on China could benefit other countries.

“As the U.S. tariff is targeted at China as compared to a blanket tariff, the silver lining is that the other U.S. trading partners could benefit from some degree of trade diversion,” DBS said. “Singapore, with its long-standing U.S.-Singapore Free Trade Agreement (USSFTA), could benefit. This is positive for companies with operations in the U.S. and whose competitors are Chinese companies.”