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In this Explainer, find out...
What is the history behind United States (US)-Singapore trade relations?
How has the US and Singapore’s trade relations progressed since 2016?
What will US-Singapore trade relations look like under the new Trump administration?
Introduction
Today, Singapore maintains a strong commercial relationship with the US, being one of Singapore’s closest trading partners. The US has consistently been one of Singapore’s top three import sources and export destinations. Fundamentally, it is in Singapore’s best interest to maintain peaceful and prosperous ties with the US, with trade and economic cooperation being a mainstay.
In this Policy Explainer, we will explore how Singapore’s trade relations with the US have evolved since independence, with a special focus on the US-Singapore Free Trade Agreement (USSFTA) and trade relations under the Trump and Biden administrations. We will also explore what US-Singapore trade relations may look like under a new Trump administration.
History of US-Singapore Trade
Establishment of US-Singapore Trade Relations
The US has historically had a presence in Singapore since the 1800s, with an embassy formally established in April 1966. A Singaporean embassy in the US’ capital, Washington DC, soon followed in April 1967. Establishing diplomatic ties gave Singapore the chance to build strong trade relations with the world’s largest economy.
The presence of American financial institutions in Singapore before independence, like JP Morgan or the Bank of America, encouraged some trade of services between the two nations. Their presence also made it easier for American companies to set up in Singapore. After independence, several American companies were among the first multinational corporations (MNCs) that opened offices in Singapore. This list includes Procter & Gamble, Merck Sharp & Dohme, and Applied Materials, which set up manufacturing plants and offices in Singapore in the 1980s to 1990s, investing in the economy. The rise of manufacturing plants in Singapore increased the trade of goods between the two nations, as products like pharmaceuticals and electronics were produced in Singapore and exported to the US.
Trade relations between the US and Singapore were strong, even before the USSFTA was ratified. When the agreement was being negotiated in 2002, the US was Singapore’s second-largest trading partner, and the US was Singapore’s largest source of foreign direct investment (FDI). Singapore was valuable to the US as well, being the US’s 11th largest trading partner. This was notable as Singapore only ranked 23rd in the world in terms of GDP per capita at the time.
Additionally, Singapore was interested in pursuing growth through its exports and free trade. This is evidenced by Singapore’s efforts to create FTAs with its main trading partners. Before the USSFTA, Singapore had signed a bilateral FTA with Japan and an agreement for the ASEAN Free Trade Area.
The US-Singapore Free Trade Agreement
How did the USSFTA come about?
In the late 1990s, Singapore was still reeling from the Asian Financial Crisis. There were also some lingering tensions between Singapore and the US, such as from the 1994 Michael Fay incident where an American teenager was caned for vandalism, sparking objections from the Clinton administration and outcry from the American press.
Fortunately, an impromptu golf game between then-Prime Minister (PM) Goh Chok Tong and President Bill Clinton in 2000 allowed PM Goh to convince Clinton to kickstart negotiations. PM Goh proposed that the FTA could anchor the US’s position in Asia, a point which ultimately convinced Clinton to go ahead with negotiations.
The USSFTA was signed in 2003 and implemented by both nations in 2004. Notably, it was the first and only occasion where the US engaged in a bilateral FTA with an ASEAN country. Today, the USSFTA is a cornerstone for US-Singapore trade ties.
What are the terms of the USSFTA?
Key provisions of the USSFTA include those relating to Rules of Origin (RoO), electronic-commerce stipulations, and enhanced intellectual property (IP) rights.
RoO provisions refer to a set of criteria that defines a product’s country of origin, to determine whether it qualifies for preferential treatment by an FTA. The USSFTA’s provisions allowed more goods and services from both countries to qualify for lower customs duties and taxes. Additionally, the process of importing and exporting goods becomes more efficient, which can facilitate trade between both countries.
Beyond RoO provisions, the USSFTA also contained electronic commerce stipulations. The USSFTA enables digital users in Singapore to purchase US-made content through the internet without paying additional customs duties, and vice versa. In doing so, these provisions help to facilitate cross-border trade of digital goods and services, making it far easier for businesses to engage with foreign markets and sell their products and services online.
Finally, robust IP assurances in the USSFTA have helped to safeguard business interests for both nations. This comes in the form of both anti-piracy regulations and IP protections, like patent retention and trademarks. It also prohibits copyrighted content from being circulated in both countries.
The inclusion of IP protections benefit companies by ensuring that they are recognised and properly compensated for their work. They also help businesses protect inventions and prevent unauthorised use by rival companies. This encourages innovation, in turn allowing both countries to reap the fruits of economic growth.
The terms of the USSFTA have laid the foundation for all trade between the US and Singapore since 2004. Despite changing administrations, geopolitics, and priorities, bilateral ties have remained fairly stable. Efforts to find new areas of cooperation have continued, and many American businesses and individuals still have bases in Singapore.
Recent Developments in US-Singapore Trade since 2016
While the USSFTA remains a significant milestone in US-Singapore trade, the US’ attitude towards the global economy has changed over the years. As a nation reliant on global trade, Singapore has had to tackle new challenges with recent developments in US trade policies, especially with the shift from economic multilateralism to protectionism.
Trade Under the First Trump Administration (2017 to 2020)
US-Singapore trade under the first Trump administration was influenced by the US foreign policy stance of “America First”, prioritising American interests and espousing American unilateralism in its trade agreements. This shift away from economic multilateralism resulted in the US withdrawing from numerous international trade agreements such as the Trans-Pacific Partnership (TPP), which was a proposed trade agreement between 12 countries in the Pacific Rim, one of which was Singapore.
American unilateralism under the Trump administration was in opposition to Singapore’s support for “global trade that is based on a strong rules-based multilateral trading system”, with Singapore having “consistently supported a strong US presence” in the Asia-Pacific. Nonetheless, US-Singapore trade was marked by a desire to maintain bilateral economic ties amidst the US’ reduced commitment to multilateral economic institutions.
On 25 October 2017, during then-PM Lee Hsien Loong’s visit to the White House, both leaders noted the importance of the USSFTA, and “supported expanding economic ties through closer cooperation on bilateral tax issues.” Further, both nations also recognised the enhanced economic cooperation from the 2016 Memorandum of Understanding on e-Commerce, Smart Cities, Infrastructure and Financial Technology (FinTech).
However, Singapore’s economic ties with the US also suffered from American mercantilism and protectionism under the first Trump administration. In 2019, the US Treasury added Singapore to a watchlist for currency manipulation, citing Singapore’s large current account surplus and “net foreign exchange purchases of at least US$17 billion” in 2018 as the main reasons behind Singapore’s addition. Moreover, the US-China trade war waged by Trump heightened the risk of the world’s two largest economies decoupling — a move which would affect Singaporean exporters who are highly linked to Chinese supply chains and US markets.
Trade Under the Biden Administration (2021 to 2024)
Overall, US-Singapore trade relations under the Biden Administration have seen their fair share of ups and downs. While there were immediate benefits arising from the change in administration, many of the proposed multilateral agreements failed to significantly enhance economic growth and development.
After Biden assumed the presidency in 2021, the US began easing back into multilateral economic cooperations, with Singapore benefitting from the US’ launch of the Indo-Pacific Economic Framework for Prosperity (IPEF) on 23 May 2022. This helped to strengthen the US’ economic leadership in the region while enhancing supply chain resilience for partner countries like Singapore in preparation for disruptions.
However, the Biden administration did little to reverse Trump-era trade policies, stating that it had no intention to join the TPP following Trump’s withdrawal. It also failed to make progress on negotiations for the IPEF’s trade component. The IPEF did not include lowered tariffs, which undermined its ability to promote multilateral trade. As a result, Singapore lost out on a potential avenue to further strengthen its position as a trade hub.
Similar to the Trump administration, further bilateral agreements between the US and Singapore helped to reduce trade barriers and promote economic cooperation. In particular, the US-Singapore Climate Partnership promoted collaboration in areas like funding for clean energy and innovation for zero-emission technologies.
Therefore, while the Biden administration reaffirmed a global rules-based multilateral trading system following Trump’s economic protectionism, bilateral agreements remained the primary means of fostering US-Singapore trade relations.
Future of US-Singapore Trade Relations
How Might Singapore Be Affected by the New Trump Administration?
Singapore’s foreign policy is generally indifferent towards party politics in the US, and continues to view it as a valuable trading partner in the global economy. Regardless of the administration, US-Singapore trade has remained largely unaffected, with the US consistently being Singapore’s second-largest trading partner. This agnostic approach was emphasised by PM Lawrence Wong in a November 2024 press conference, where he highlighted how Singapore maintained strong trade and investment links with the US under the last Trump administration.
However, recent trends indicate that there has been an increasing reluctance from the US to engage in multilateral trade agreements, especially in Asia. This is compounded by its unwillingness to play the role of a leading power in Asia. With spending for foreign affairs becoming especially unpopular among US residents, there seems to be political pressure to focus inward, and multilateral cooperation may be a casualty.
For example, Trump has indicated a desire to withdraw the US from the IPEF, which could undermine the initiative. One pillar of the IPEF is the strengthening of supply chains between the Indo-Pacific and the US, including ASEAN states. This could allow Singapore to expand its exports to other nations in the IPEF. If the US walks away from this commitment, it could be a lost opportunity for Singapore to strengthen its trade links with IPEF members, as they may regard the IPEF less highly as a means for enhancing trade cooperation.
There is also a risk that US-China tensions could have spillover effects for Singapore’s economy, with geopolitical instability causing disruptions to trade and supply chains. In a November 2024 press conference, PM Wong expressed his desire that Singapore could facilitate a US-China relationship where the two nations could still cooperate on key issues; a line that Singapore has taken since the previous Trump administration.
The US-China trade war waged by the previous Trump administration disrupted global supply chains. As a small nation with minimal natural resources, international supply chain disruptions can dampen Singapore’s trade with other nations, whether it be through reduced trade volumes, inflationary pressures, or a complete restructuring of supply chain systems. The new Trump administration looks likely to be similarly hawkish on China, thus it is in Singapore’s best interest to continue maintaining diplomatic ties with all parties to sustain economic development.
More generally, given how small states like Singapore would be highly disadvantaged by unilateralism and protectionism, it would be in Singapore’s best interest to maintain a friendly relationship with all its trading partners, advocate for an open, inclusive, rules-based multilateral trading order, and strengthen economic ties.
Conclusion
The world in 2024 is vastly different from how it was in 2004. While there is hope for more openness, Singapore has to be prepared for greater protectionism, especially under the new Trump administration. Further, the headwinds of potential US-China conflicts could pose major obstacles to Singapore’s economic development. That said, Singapore is expected to persist in its efforts to foster more avenues of economic cooperation and stay ahead of global trends. Even more so, Singapore is likely to continue promoting US-Singapore trade relations for the joint growth and prosperity of the two countries.
This Policy Explainer was written by members of MAJU. MAJU is a ground-up, fully youth-led organisation dedicated to empowering Singaporean youths in policy discourse and co-creation.
By promoting constructive dialogue and serving as a bridge between youths and the Government, we hope to drive the keMAJUan (progress!) of Singapore.
The citations to our Policy Explainers can be found in the PDF appended to this webpage.
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