Asia sees ‘temporary’ tariff relief, Singapore to benefit despite direct hike: analysts

[SINGAPORE] Analysts expect US President Donald Trump’s new global tariffs to offer Asia some near-term relief, even as he raised them to 15 per cent on Sunday (Feb 22), just a day after setting their rate at 10 per cent.

Trump’s actions followed a US Supreme Court’s decision to strike down his sweeping reciprocal tariffs announced on the so-called Liberation Day last year in April. The new levy goes into effect “immediately”, said Trump.

Morgan Stanley on Monday calculated that the region’s overall direct tariff burden has actually fallen, but pointed out it actually represents a slight direct increase for Singapore.

However, Singapore’s Deputy Prime Minister Gan Kim Yong on Sunday said the city-state has not revised its growth forecast, adding that its relative export competitiveness is unlikely to be affected even if tariffs were applied across the board.

The country was set to face a 10 per cent levy under the original tariffs, but now faces a 2 per cent higher weighted average tariff rate, noted Morgan Stanley.

Macquarie anticipated margin relief for consumer goods manufacturers alongside stability for tech supply chains, while Maybank sees the resulting US dollar weakness as a boon for Asian currencies.

The math behind the relief

Analysts viewed the math of Trump’s recent round of tariffs implemented under Section 122 of the Trade Act of 1974 to be in Asia’s favour.

Morgan Stanley estimated that under the new regime, the weighted average tariff rate on imports from Asia will fall to 17 per cent, down from the 20 per cent rate seen before the ruling.

Most Southeast Asian economies will see modest tariff reductions, ranging from 1 to 3 per cent. However, Morgan Stanley pointed out that Singapore and Australia face slight tariff increases of 2 per cent and 4 per cent, respectively, as they were previously subject to a lower 10 per cent baseline reciprocal rate.

However, the bank said that tariffs now appear unlikely to rise further, which “should support the regional trade cycle and, by extension, more trade-oriented economies such as Singapore, Malaysia and Thailand”.

As the target of the steepest penalties, China will see its tariff rate decline from 32 per cent to 24 per cent. This reduction could trigger front-loading of imports and temporarily lift China’s gross domestic product growth by an annualised 0.1 to 0.2 percentage points, said the bank’s analysts.

Markets in Asia-Pacific largely shrugged off Trump’s latest decision to increase the tariffs, with Singapore, South Korea, Taiwan, Hong Kong and Malaysia posting gains. Only Australia posted a drop.

Meanwhile, Macquarie noted that the ruling is highly positive for India, which escapes the punishing 50 per cent tariff imposed last year. Removing this penalty brings tailwinds to export-heavy sectors such as textiles, gems, leather and chemicals.

Window for margin recovery

The reduction of incremental tariffs provides a vital window for margin recovery, said analysts, particularly for original equipment manufacturers (OEMs) and consumer brands.

This relief is especially timely for OEMs, whose profit margins and average selling prices have come under pressure after sharing the tariff burden with their brand customers in the second half of 2025, said Macquarie analysts.

They also pointed out that goods imported from China and Asean countries will see tariff burdens drop from a 19 to 20 per cent range down to the new 15 per cent level. Companies with high US exposure, such as Samsonite, Prada, Midea, and Pop Mart, could experience direct cost relief or increased sales volumes if savings are passed down to consumers.

The fluid tariff situation is also not expected to derail the 2026 tech boom either.

Macquarie asserted that the semiconductor up-cycle remains “abnormally long”, driven primarily by robust artificial intelligence (AI) infrastructure spending and memory bottlenecks, rather than trade policy.

South Korea and Taiwan’s semiconductor export strengths are also expected to “persist” amid supply shortages and continued tariff exemptions, added Morgan Stanley. The Korean government is also set to begin its preliminary review of US investment projects soon and Taiwan is likely to follow, with no major changes to the agreed deal terms expected.

In Malaysia, the impact on electronics exports is expected to be limited, as tariffs are typically borne by end customers and exemptions exist for products supporting US AI ambitions. Furthermore, the broader geopolitical trend of localising the tech supply chain to the US and Japan is unlikely to reverse.

To navigate the volatility, some nations have traded domestic deregulation for market access.

Maybank cited how Indonesia successfully reached an agreement with the US just before the ruling, securing duty-free access for 1,819 products including palm oil and textiles. In exchange, Indonesia made deep structural compromises, exempting US companies from local content requirements and reducing Halal certification mandates for non-food items.

Analysts also broadly agreed that existing bilateral trade deals, including those involving Malaysia and India, will likely remain intact.

Morgan Stanley suggested businesses will likely operate under the assumption that the “peak level of uncertainty” regarding trade tensions has already passed. However, Macquarie analysts noted that it was unclear if the US$175 billion worth of tariffs already paid by businesses will be refunded.

Forex fallout and safe havens

In the currency markets, the policy uncertainty generated by the Supreme Court ruling and the White House’s rapid pivot has weighed on the greenback.

Maybank analysts observed that the US dollar weakened broadly, and expected Asian currency pairs to start lower as the regional currencies catch up to the tariff developments.

For Singapore, the brokerage highlighted the strength of the Singdollar and its stable interest rates as proof of the city-state’s safe-haven status.

The tariff uncertainty has also driven a surge in safe-haven assets, said Maybank, noting that gold prices rose 2.1 per cent and silver jumped 7.8 per cent against the softer dollar.

Still, the relief rally comes with an expiration date after the current levies’ 150 days are up.

“This tariff relief may be temporary and new sectoral and economy-specific tariffs may still come into force,” said Morgan Stanley. “The US government is likely to pursue more durable measures through Section 301 – addressing unfair trade practices – and Section 232 – citing national security concerns.”