THE world's biggest economies are at loggerheads but Singapore's exposure to the US-China trade war is small, an official analysis has found.
Other watchers also believe that growth from exports to five key South-east Asian markets could shelter the Republic from the conflict.
Value added from US-China bilateral exports made up 1.29 per cent of Singapore's gross domestic product (GDP) last year, two government economists wrote in a report on Thursday.
Most of that was from China's computer, electronic and optical equipment exports to the United States.
Value added embodied in foreign exports refers to when Singapore supplies goods and services at an intermediate point in the value chain - such as when firms here had a hand in products shipped out of another country.
The figure, which is up from 1.18 per cent in 2011, reflects Singapore's indirect exposure to export flows between the two squabbling countries.
But economists Nicholas Chiang and Tek Yong Jian, from the Ministry of Trade and Industry (MTI), added in their report that "the actual impact of the ongoing US-China trade conflict on the Singapore economy would likely be smaller for two reasons".
Only some of the goods exported between the US and China have been slapped with tariffs, they noted. Also, while tit-for-tat duties could hurt bilateral export volume, "it is not likely that the exports would fall to zero".
The Republic's top export partners, by value added, are the combined Asean-5 markets of Malaysia, Indonesia, the Philippines, Thailand and Vietnam; China; the European Union-28 bloc; the US; and India.
The share of the economy embodied in Asean-5 exports in fact grew between 2011 and 2017, from 4.66 per cent to 5.25 per cent, even as value added built into exports from China, the US, and EU members dipped. (see amendment note)
Meanwhile, the value added from gross exports to the Asean-5 markets rose to 13.44 per cent of the GDP last year, from 12.45 per cent in 2011.
This was slower than the pace of growth for value added from gross exports to China, which jumped from 7.8 per cent to 9.5 per cent in that time.
But Maybank Kim Eng senior economist Chua Hak Bin told The Business Times that South-east Asian exports are likely to pick up over the next 10 years, on closer economic ties in the region, while China could stagnate.
"Over the last decade, the supply chain has been increasingly shifting and centred on China, so it's no surprise that the value added on the Chinese end has risen more dramatically," he said on the phone. "But, at the same time, Asean has been taking steps to better integrate its economies."
Dr Chua said the US-China trade war may be a protracted conflict, with China-centred supply chains likely to break up, "and companies will want a more flexible production strategy".
Citi research analysts Kit Wei Zheng and Ang Kai Wei also wrote in a flash report: "Headwinds to exports and a patchy domestic demand recovery notwithstanding, we note potential cushions from the diversion of trade and production from China to Asean to circumvent US tariffs."
Still, Mr Chiang and Mr Tek warned that their analysis does not consider any adverse impact that might be felt if trade war escalations cause a sharp fall in global confidence or a tightening of liquidity conditions.
"In such a scenario, global consumption and investment, and hence global growth, would decline, thereby causing a drop in the global demand for Singapore's exports," they wrote.
"The negative impact on the Singapore economy would likely be larger in this case."
Amendment note: This article has been amended for clarity.