Singapore cuts currency appreciation pace amid growing fears of US tariff shockwave

Singapore central bank loosens policy as US tariffs weigh on growth expectations

Singapore‘s central bank, the Monetary Authority of Singapore, has eased its monetary policy stance for the second time in 2025, citing intensifying risks from weakening global trade and the ripple effects of escalating US tariffs. In its latest statement on April 14, the MAS said it would slightly reduce the rate of appreciation of the Singapore dollar’s Nominal Effective Exchange Rate (S$NEER) policy band. The width of the band and its central level remained unchanged. This policy adjustment comes amid a worsening global outlook shaped by protectionist measures and a slowdown in manufacturing demand, affecting major economies linked to Singapore’s trade network.

The MAS announcement also coincided with a downgrade in Singapore’s full-year GDP growth forecast to a range of 0% to 2%, down from the earlier estimate of 1% to 3%. The Ministry of Trade and Industry cited slower momentum across trade-related sectors and heightened uncertainty from the global tariff environment. The central bank also revised its core inflation forecast for 2025 to 0.5% to 1.5%, from an earlier range of 1% to 2%, signalling weaker domestic and imported price pressures ahead.

Why did MAS adjust its exchange rate policy band again in 2025?

The MAS manages monetary policy by adjusting the slope and width of the S$NEER band rather than altering interest rates directly. A flatter slope in the exchange rate band effectively allows the Singapore dollar to appreciate more slowly, making exports relatively more competitive amid a challenging external backdrop. This second policy easing in less than four months underscores mounting concerns about trade deceleration caused by US protectionist measures, including wide-ranging tariffs introduced in early 2025.

The US government’s sweeping tariff package—imposing 10% to 125% duties on various imports, including electronics, semiconductors, and industrial components—has introduced fresh headwinds for Asia’s open economies. Singapore, whose economy relies heavily on cross-border trade and re-exports, is highly exposed to shifts in global demand. The central bank warned that countries exporting to tariff-imposing markets will face lower demand, pricing pressure, and dampened production. These effects are expected to spill over into Singapore’s key trading sectors.

How vulnerable is Singapore’s economy to global trade disruptions?

Often seen as a bellwether for global economic trends, Singapore’s economy is particularly sensitive to trade volume fluctuations. Trade as a percentage of GDP exceeds 300%, making the island nation especially vulnerable to tariffs and trade wars involving major partners like the United States and China. The MAS said that recent signs of financial market stress and asset repricing globally are compounding the downside risks for trade and investment.

In its statement, the central bank highlighted that tighter global financial conditions and weaker demand across supply chains could reinforce negative feedback loops for Singapore’s trade and production outlook. These macroeconomic concerns have also been reflected in GDP figures: the economy grew 3.8% year-on-year in the first quarter of 2025, slowing from 5.0% in the previous quarter, continuing a deceleration trend that began in late 2024.

What are economists expecting from MAS for the rest of the year?

Economists are increasingly cautious about the growth trajectory, with some flagging the possibility of further easing if downside risks intensify. OCBC economist Selena Ling noted that the MAS’ reference to a negative output gap and lower inflation expectations marked a clear dovish tone. Maybank’s Chua Hak Bin suggested that if trade conditions deteriorate into a technical recession, a neutral monetary policy stance may be adopted, although he is currently projecting 2.1% GDP growth, slightly above the revised official range.

The central bank’s shift to a more accommodative posture comes amid concerns that inflation will remain subdued. Both core and headline inflation forecasts for 2025 were lowered, reflecting the anticipated disinflationary impact of weaker global activity and softer commodity prices.

What are the broader implications of U.S. tariffs on Singapore’s financial and trade systems?

Beyond GDP and inflation metrics, the structural impacts of the new US tariff regime could reshape trade flows in Asia. The US has increasingly invoked national security as justification for tariffs on sectors such as semiconductors and electronics—categories crucial to Singapore’s re-export economy and manufacturing services. While Singapore itself has not been the direct target of tariffs, its intermediate goods often form part of regional value chains destined for the US.

In response, multinational companies could reassess production routes, while Singapore-based ports, logistics hubs, and financial intermediaries may face declining throughput and capital flows. The MAS’ policy shift can thus also be interpreted as a preemptive buffer to preserve external competitiveness and support domestic sectors as global value chains are realigned.

The situation has also created challenges for Singapore’s financial services sector. Risk sentiment has been volatile amid heightened uncertainty, with potential implications for wealth flows, investment banking mandates, and fund management services. Market reactions to the MAS decision were mixed: while the Singapore dollar initially weakened on the policy news, it later reversed losses to trade higher, reflecting a complex interplay of capital flows and interest rate expectations.

How is Singapore positioning itself for the months ahead?

Singapore’s government has indicated readiness to support vulnerable sectors, including trade logistics, electronics, and financial services, through targeted policy tools and fiscal measures if needed. The MAS also reiterated that it stands prepared to reassess its policy stance should risks worsen.

At the heart of this evolving landscape is the city-state’s commitment to maintaining economic resilience and financial stability. With inflation cooling, growth slowing, and global uncertainty rising, the MAS’ latest move illustrates the fine balancing act between managing short-term shocks and ensuring long-term competitiveness. The easing of Singapore’s currency policy reinforces its strategy of gradualism and prudence in navigating external shocks without triggering destabilising domestic imbalances.