Facing a new trade order, Korea needs a Singaporean playbook

Audio report: written by reporters, read by AI

Ko Young-kyung

The author is a research professor at Yonsei University Graduate School of International Studies. 

“Despite our limitations as a small state, we cannot afford to be a passive bystander in this evolving landscape. Instead, we must respond with agility and resolve, and actively shape our own destiny.”

With these words at a lecture hosted by Singapore’s Foreign Service Academy on April 16, Singaporean Prime Minister Lawrence Wong drew widespread attention. In the wake of President Donald Trump’s “Liberation Day” tariff announcement on April 2 — amid a global retreat from free trade and rising geopolitical risks — Wong’s bold and decisive leadership is standing out.

The United States imposed a universal 10 percent tariff on all trading partners, with additional tariffs on countries running trade surpluses with the United States. Singapore, which runs a trade deficit with the United States, is subject to the 10 percent tariff. Indochina nations, such as Cambodia, Laos and Vietnam, which all run surpluses with the United States, face tariffs exceeding 40 percent, while Thailand and Indonesia have been hit with tariffs above 30 percent. 

In this context, Chinese President Xi Jinping visited Vietnam, Malaysia and Cambodia —all countries with U.S. trade surpluses facing steep new tariffs. Xi proposed packages of investment and economic cooperation, but the offer cannot be welcomed without criticism. Although China is Asean’s largest trade partner, the United States remains the top destination for Asean exports and investment. Vietnam, for instance, derives 30 percent of its GDP from exports to the United States, making it the most heavily U.S.-dependent economy in the region. 

Furthermore, unresolved tensions over the South China Sea remain a persistent flashpoint. To prevent circumvention of tariffs, the United States has warned of a 3,521 percent tariff on Chinese companies producing Southeast Asian solar panels. Le Hong Hiep, a researcher at Singapore’s ISEAS–Yusof Ishak Institute, described Xi’s visit to Vietnam as a “theatrical show staged amid hidden tensions,” highlighting the uncomfortable realities behind the diplomatic pageantry.

Strengthening regional competitiveness

Amid these complex dynamics, Singapore has been vocal in opposing the U.S. tariff policy. Having signed a free trade agreement (FTA) with the United States and imposing zero tariffs on U.S. goods, Singapore expressed disappointment at being subjected to the universal 10 percent tariff. Prime Minister Wong criticized the U.S. approach, saying it fundamentally rejected World Trade Organization (WTO) principles such as the Most-favored-nation (MFN) rule, adding, “This is not how friends treat each other.” 

Singapore’s heightened anxiety over the 10 percent tariff stems from its open economy model. As a major hub for trade, logistics, finance and high-end manufacturing, Singapore’s exports amount to more than 170 percent of its GDP. Handling 37 million TEUs (20-foot equivalent units) annually, it is one of the world’s largest transshipment ports. Manufacturing accounts for 21 percent of its GDP, with semiconductors and electronic components among its top exports. Consequently, Singapore views tariffs as a direct threat to national competitiveness.

Wong predicted that the era of free trade is ending, with a new global order of rising protectionism taking its place. While other ASEAN countries scramble to negotiate tariff exemptions, Singapore is pursuing a different strategy. Immediately after the tariff announcement, Wong launched the Singapore Economic Resilience Taskforce (SERT). Comprising economic agencies, business federations, employers' groups and labor unions, SERT aims to assess the impact of tariffs on jobs, wages, capital markets and national competitiveness. Recognizing that “once trade barriers are erected, they are much harder to lower,” Singapore’s 2025 budget includes 800 Singapore dollars ($611) in vouchers, utility bill support for low-income households and expanded direct cash assistance for vulnerable groups to prepare for a potential downturn.

Singapore’s strategy does not end with domestic measures. Wong also emphasized strengthening regional integration and building a global partnership network. Under the “Singapore Plus (SG+)” strategy, Singapore aims to position itself as Southeast Asia’s “control tower,” creating synergies with neighboring countries. The heart of this strategy is the “Twinning” model, which combines Singapore’s technology and capital with the cost competitiveness of neighboring economies.

The “SG+Johor” model leverages the close proximity between Singapore and Malaysia’s Johor state — just an hour away — to place research and development and testing in Singapore, while assembly and manufacturing are based in Johor. The “SG+BBK [Batam, Bintan and Karimun]” model assigns global research and innovation functions to Singapore and manufacturing and packaging to Indonesia’s BBK islands. Both partnerships aim to cultivate high-value-added industries such as medical technology, semiconductors and precision engineering, thereby strengthening regional competitiveness.

Upgrading ASEAN partnerships 

By conducting R&D domestically while outsourcing production to lower-cost neighboring countries, Singapore is sharpening its competitiveness and eyeing broader markets. At the same time, it is emphasizing cooperation with major economic blocs like Korea, China, Japan and the European Union, while clearly articulating its intention to diversify into “new frontiers” across the Middle East, Latin America and Africa.

For Wong, who faces a general election in May, the launch of SERT and Singapore’s tariff response represent a major leadership test. What deserves particular attention is Singapore’s choice of a long-term strategy centered on strengthening national competitiveness and regional cooperation. Rather than scrambling over short-term tariff negotiations in the U.S.-China economic war, Singapore is focusing on responding to fundamental changes in the global economic order.

Korea, which faces even higher tariffs than Singapore, has been preoccupied with bilateral negotiations with the United States. While worsening trade conditions have led the International Monetary Fund (IMF) to slash Korea’s 2024 growth forecast from 2.0 percent to 1.0 percent, it is time for Korea to consider a longer-term strategy akin to Singapore’s. As the SG+ strategy shows, in an era of protectionism, the core of national competitiveness lies in an open approach that builds bridges, not walls, and fosters regional integration.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.