Impact of tariffs not temporary, world will not go back to status quo: SM Lee

SINGAPORE: The world will not go back to “status quo”, or what it was like before US President Donald Trump rolled out tariffs, said Senior Minister Lee Hsien Loong on Tuesday (Jul 15).

“In trade policy, economic policy, once you make a move, you can’t take it back. There are consequences,” he added. 

Mr Lee was speaking in a wide-ranging dialogue that went into geopolitics, climate change and domestic issues at a dinner held by the Economic Society Of Singapore (ESS).

His comments came in response to a suggestion that the impact of the tariffs might be temporary, or last only while the current US president remains in office.

“When you first put in the tariffs, everybody complains,” he said. For example, those who need steel will ask why steel is so expensive and those who make chips will ask why they can’t sell them to China, said Mr Lee in the dialogue with ESS president Euston Quah. 

“But once you have put in the tariffs, and once new players come who depend on the tariffs and need the tariff protection, and you say ‘I’m taking the tariffs away, we’re going back to where we were’, it’s politically not possible.” 

When asked if Singapore is “not so badly affected yet”, Mr Lee quoted a Chinese idiom: “The person who retreated 50 steps from the battle laughs at the person who retreated 100 steps, and says, ‘you’re worse off than me’.” 

While Singapore has a free trade agreement with the US, the US has decided that Singapore will face 10 per cent tariffs. “We console ourselves, that that is the best rate, and we hope that we stay there,” said Mr Lee.

Referencing Trump’s move to withdraw the United States from the Paris climate deal, Mr Lee noted that from an economic perspective, the climate is a common resource, and global warming is inherently a “very difficult problem” to solve. 

The world may need to solve it by coming together and solving it collectively, he added. 

“But when you do it collectively, there’s always the risk of somebody opting out and saying ‘sorry, you carry on, I will just free ride on your hard work and your sacrifices’,” said Mr Lee. 

“And whether or not one big country opts out from the Paris agreement, we have the risk of a free rider.” 

Even if one country opts out, the other countries should “do the sensible things”, he added. 

But even like-minded countries who come together have disagreements among themselves about the rules that will reduce their emissions, said Mr Lee. 

Some Southeast Asian countries have already said if America is going to be like this, they would have to reconsider their commitments, he noted. 

Singapore is trying to be a good global citizen and do its part so that it is in “good standing” and not free riding on other people, he added. 

When asked about a new framework for the global economy, Mr Lee said: “I suppose the best framework is the world temporarily minus one.” 

This means the framework mostly remains, while America still has to do business with the rest of the world, he added. 

“But, well, for the time being, you wish the rules were different, and you are trying your best to change it. Temporarily, meaning maybe at some point you can come back and participate again in a more open and constructive way,” said Mr Lee.