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Trump’s policies could ignite trade wars, MAS head cautions

SINGAPORE — The global economy will face “disastrous consequences” if United States protectionist measures proposed by incoming President Donald Trump prompt trade wars, the head of Singapore’s central bank said.

MAS managing director Ravi Menon. Photo: Reuters

MAS managing director Ravi Menon. Photo: Reuters

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SINGAPORE — The global economy will face “disastrous consequences” if United States protectionist measures proposed by incoming President Donald Trump prompt trade wars, the head of Singapore’s central bank said.

Some of the possible actions — such as rejecting a US-Pacific trade deal, extra taxes on US importers and labelling major trade partners as currency manipulators — “may well attract retaliatory measures”, Mr Ravi Menon, managing director of the Monetary Authority of Singapore, said in a speech at UBS’ Wealth Insights Conference on Monday (Jan 16).

But in all likelihood, the outcome “may not be that bad” since there is still uncertainty around Mr Trump’s policies and support for free trade remains strong among the US establishment, he said.

Export-reliant Singapore is among the biggest losers from a slump in trade, with the economy probably recording its worst performance last year since the 2009 global financial crisis. Officials have vowed to push ahead with the Trans-Pacific Partnership, a free-trade pact signed between 12 countries including the US, Japan and Singapore. Mr Trump pledged on the campaign trail to withdraw from the deal when he takes office.

While there is optimism about a US fiscal boost and concern about a trade backlash, “there remains considerable uncertainty as to the actual policy changes in store,” Mr Menon said. “They may not pan out as expected.”

Meanwhile, Singapore is expected to continue a modest pace of expansion, with authorities forecasting growth of 1 per cent to 3 per cent for this year, Mr Menon said. 

Pointing out several challenges facing Singapore, Mr Menon called the ongoing economic restructuring “a work-in-progress”, saying the Republic needed to do more to raise productivity growth.

In addition, Singapore will not be immune to the global tightening of financial conditions, volatility in capital flows, and potential stresses in the regional sector, he added. However, Singapore’s “macro fundamentals are sound and we will weather these storms”, he said. 

Modern services — including finance, business and information and communications technology — will be supported by continued growth in the region, and trade-oriented industries should benefit from a mild upturn in global and regional electronics, he said. WITH AGENCIES

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