PUBLISHED ONMay 24, 2025 12:55 AMByDana LeongLocal businesses are currently grappling with an "erratic, unpredictable and highly volatile" economic landscape, forcing them to take "a shorter-term, more conservative view" on business plans, said Darren Goh, senior business development & quality assurance manager at Dynamic Optronics.
Dynamic Optronics, a local optical products manufacturer, is just one of a number of local companies here bracing for impact from the sweeping US tariffs imposed on April 2.
With sales to the US contributing between 50 to 75 per cent of its annual revenue, Dynamic Optronics is at a crossroad.
As a relatively young Small, Medium Enterprise (SME) that is still in the red, the unexpected onset of the US tariffs has thrown a spanner in the works, as customers demand concessions to afford the additional tariff costs.
Goh said one key customer is requesting that the company shoulder half the tariff charge — which costs approximately one per cent of its total revenue — that would push down profit margin.
For an SME that is "still not yet profitable", the impact of the tariffs will be multiplied in the event that more customers pose such requests, he lamented.
Goh told AsiaOne that it plans to "progressively increase (prices), depending on the severity of the tariff situation".
The predicament of Goh's company and other businesses were reflected in the Singapore Business Federation (SBF) flash poll in April to assess the impact of recent US tariff changes on businesses.
The poll found that four in five local businesses expect to be negatively impacted by the tariffs.
SBF received responses from 294 local companies, of which over 80 per cent were SMEs.
SBF's poll found that 74 per cent of businesses expect a decline in revenues in the near-term.
SMEs with high levels of exposure to US markets are particularly at risk of being impacted, compared to large corporations and multinational corporations (MNCs) that have more diversified export channels.
Apart from sales volumes being impacted, half of the respondents expect their operational costs to rise, with almost four in 10 SME respondents expecting costs to rise by almost 25 per cent.
With their top and bottom line at risk, SBF found that a majority of these businesses are likely to raise prices of their goods, with 35 per cent planning to pass on the full additional costs to consumers.
On the other hand, 18 per cent of businesses are planning to keep prices the same by negotiating cost-sharing with suppliers.
Apart from adjusting their pricing strategies, businesses are prioritising exploring opportunities to pivot their business strategies, such as moving business away from the US to other markets like Southeast Asia and the Middle East.
Meanwhile, Dynamic Optronics plans to pass on the tariff costs to US consumers.
It also intends to channel more resources into new business opportunities that may result from customers pivoting away from supply-chain countries that face higher tariff rates.
On the other hand, pricing at Singaporean logistics provider NinjaVan is not affected by the tariff costs, but is "determined by the agreed Incoterms (international commercial terms)", said a spokesperson in response to AsiaOne's queries.
With ongoing trade negotiations and a current 90-day pause on reciprocal tariffs by the US, businesses are faced with even greater uncertainty that may prompt them to adopt a "wait-and-see" approach before making spending decisions.
Businesses are particularly bracing themselves for delays in orders, more volatile ordering patterns, reduced contract values or volumes, and extended payment terms from customers, according to SBF's findings.
As a result of the fluctuating cash flow, 62 per cent of businesses surveyed noted an increased need for working capital over the next year.
SMEs represented the largest proportion of respondents anticipating a significant increase in working capital needs, reflecting the tighter cash flow needs for such businesses.
To finance the increased need for working capital, businesses said that they will turn to existing cash reserves or delay investments to supplement their working capital needs.
Theo10, a local pharmaceutical company specialising in skincare products to treat eczema, similarly postponed regional expansion plans, and instead moved funds into securing more supplies to pre-empt price hikes as a result of the tariffs.
"We’ve stocked up on key ingredients from long-standing partners we trust — securing better rates through volume discounts," company director Theodore Khng told AsiaOne, adding that the company has also found "viable alternatives" for less essential materials.
SBF's findings also showed that others businesses intend to increase borrowing from banks or other financial institutions to finance their working capital needs.
"Even though interest rates are coming down, (they're) still not low. So I think for SMEs, many are still a bit reluctant to apply for loan or working capital at this point, unless they really have no choice," Association of Small and Medium Enterprises (ASME) president Ang Yuit told CNA.
During Budget 2025, the Government announced initiatives — such as the 50 per cent corporate income tax rebate and the enhanced Progressive Wage Credit Scheme — which were reiterated by Prime Minister Lawrence Wong as key measures to help businesses weather the uncertainty in the short-term.
The poll found that tax relief, financial assistance and regulatory flexibility were the top three forms of aid requested by businesses.
Dynamic Optronics' Goh said that the Government "definitely can do more to better counter the current tariff situation".
Specifically, he suggested enhanced rental subsidies and increasing foreign labour quotas, especially since the access to skilled labour is a "critical pain point" for Dynamic Optronics.
Theo10's Khng shared similar sentiments, saying that there is "room for improvement", specifically in terms of a "faster turnaround for grant reimbursements" and "stronger access to flexible, affordable working capital loans".
Chaired by Deputy Prime Minister Gan Kim Yong, the Singapore Economic Resilience Taskforce (Sert) was set up to address concerns and mitigating the impact of the US tariffs.
Providing an update on Sert's progress on May 16, DPM Gan said that on top of the pre-existing Budget 2025 initiatives, which include corporate tax rebates and market readiness assistance grants, the Government is developing additional measures to roll out "if the situation warrants it".
In particular, Sert is actively engaging with banks and reviewing their financing schemes to see how they can alleviate the cash flow and working capital concerns companies are increasingly facing.
While the US is unlikely to back down on their 10 per cent "umbrella" tariffs, they have extended a "significant opportunity" to discuss "some form of concession for Singapore to have an official preferential tariff, even to the extent of zero tariff for pharmaceutical exports to the US", said DPM Gan.
"It's going to be a long engagement and consultation and negotiation with the US and Singapore before they're able to share more details," he said.
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