SINGAPORE - The recent rise in global tariff rates acts like a production tax on Singapore's producers and exporters, who are price takers in the world market, the Monetary Authority of Singapore (MAS) said Monday in its quarterly Macroeconomic Review.

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With Singapore's non-oil terms of trade already on a weakening trend since mid-2024, further tariffs would deepen the strain by squeezing export margins, the MAS noted in its analysis of how US tariffs could impact Singapore's economy through production, income, consumption, and ultimately GDP growth.

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When firms face narrower margins, their profit-maximizing level of output declines, leading to reduced production, the MAS said. This decline in output results in falling corporate incomes and profits, which in turn dampen demand for factors of production.

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The production-induced shock then permeates the domestic income stream, further constraining aggregate demand in the economy, the report said.

The United States was Singapore's second-largest export market in 2024, accounting for 11 percent of domestic exports. Products subject to the baseline tariff made up roughly 55 percent of Singapore's domestic exports to the United States, according to the MAS.