World Economy Faces Permanent Shift Due to Tariffs, Says Lee

Senior Minister Lee Hsien Loong of Singapore has asserted that the global economic landscape will not revert to its previous state following the imposition of tariffs by former US President Donald Trump. Speaking at a dinner hosted by the Economic Society of Singapore on July 15, 2023, he emphasized that once trade policies are enacted, they have lasting consequences.

In a dialogue addressing various topics, including geopolitics and climate change, Lee responded to a notion that the effects of tariffs could be temporary. He stated, “In trade policy, economic policy, once you make a move, you can’t take it back.” According to Lee, the introduction of tariffs creates a new economic reality, as businesses and sectors begin to rely on them for protection.

Lee illustrated his point by referencing the concerns of industries affected by tariffs. For instance, manufacturers dependent on steel may lament increased costs, while semiconductor producers might express frustration over restrictions on sales to China. He noted that reversing tariffs could be politically unfeasible due to the emergence of new players who rely on such protections.

Despite Singapore’s free trade agreement with the US, the nation faces a 10 percent tariff on certain goods. Lee remarked, “We console ourselves, that that is the best rate, and we hope that we stay there.” He also touched on the broader implications of US withdrawal from international agreements, such as the Paris climate deal, highlighting the complexities of collective action in addressing global warming.

Challenges of Global Cooperation

Lee stressed the need for collective action to tackle climate change, while acknowledging the risks of nations opting out of such commitments. He explained that the challenge lies in ensuring that countries do not take advantage of the efforts of others. “When you do it collectively, there’s always the risk of somebody opting out,” he said, warning against a “free rider” mentality.

He also mentioned that some Southeast Asian nations are reconsidering their climate commitments in light of the US’s stance. Singapore aims to maintain its reputation as a responsible global citizen, ensuring that it does not benefit from the efforts of others without contributing its fair share.

Addressing the potential for a new economic framework, Lee suggested, “the best framework is the world temporarily minus one,” indicating a need for continued engagement with the remainder of the global economy despite challenges presented by the US.

Leadership and Defining Success

During the discussion, Lee tackled the issue of leadership in times of uncertainty, particularly the risks associated with leaders who prioritize short-term solutions. He noted that it is often easier for leaders to simplify complex issues for immediate public consumption rather than provide comprehensive analyses that may be more suitable for informed audiences.

“Good leadership must have trust and the ability to engage in political debate anchored on logic and evidence,” he said. Leaders should be equipped to communicate complex economic matters in an accessible manner, ensuring public confidence in their decision-making.

In response to a question regarding success for young Singaporeans, Lee encouraged the youth to define their aspirations. He acknowledged that they have advantages that previous generations did not enjoy, including improved living standards and educational opportunities. “What do you want to make of your life, for yourself, for your family, for your country, for your fellow human beings?” he asked.

He urged young people not to adopt a passive approach, cautioning, “If you lie flat after a while, I hope you’re ashamed of yourself. We did all these for you, make use of it and show us that actually, you’re better than us.”

Lee’s remarks highlight the complex interplay of global trade, climate policy, and the responsibilities of current and future leaders in navigating these challenges.