“According to the administration, the sweeping tariffs are needed to fix America’s trade imbalances but there is nothing inherently wrong about running a trade deficit,” Mr Wong said.
“It simply means that American consumers are buying more from the world than the world is buying from America.”
The US’ focus on the trading of goods “only gives a partial picture”, as the US runs a surplus with many of its trading partners in services, he added. These include the exporting of software services, education, entertainment, financial and business services to the world.
Mr Wong criticised the US approach as a “fundamental rejection” of World Trade Organization principles, such as the Most Favoured Nation (MFN) rule, which states that every member must treat all other members equally.
The principle has “long been the bedrock of the multilateral trading system” in ensuring a level playing field for both big and small countries, he said.
The US move, he said, undermines this principle and opens “the door to selective country-by-country trade relationships, based on unilateral preferences”.
If other countries adopt the same approach, the rules-based trading system will unravel – a reality that will spell trouble for all nations, especially for smaller countries like Singapore, he said.
“Small countries have limited bargaining power in one-on-one bilateral negotiations so the major powers will dictate the terms and we risk being marginalised and sidelined.”
RISK OF FULL-BLOWN TRADE WAR
The likelihood of a full-blown global trade war is growing, the prime minister cautioned. While Singapore will not impose retaliatory tariffs, other countries may. China has already announced countermeasures and the European Union is evaluating its response.
Mr Wong said there is “a brief window” for countries to negotiate with the US before the higher tariff rates take effect on Apr 9.
“It may be possible for some rates to be lowered, but we have to be realistic,” he told the House.
Said Mr Wong: “Once trade barriers go up, they tend to stay up. Rolling them back is much harder, even after the original rationale no longer applies.
“Even if some partial accommodations are eventually worked out, the uncertainty generated by such a drastic move will dampen global confidence and growth.”
The baseline 10 per cent tariff also does not appear to be negotiable, he added.
At the same time, other countries – including in Europe – may follow suit to protect their critical industries from competition. So, the latest US tariffs “may just be the beginning of more increases to come globally”, Mr Wong said.
