Singapore diversfies amid US-China standdoff

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Amid heightened US-China tensions, Singapore reaffirmed its neutral stance at the ASEAN summit in October 2024, with Singaporean Prime Minister Lawrence Wong emphasising economic stability and strategic balance.

Singapore continues to maintain strong trade ties with both superpowers, even as the US and Beijing intensify pressure on regional allies to align with their respective economic and security policies.

The city state has long navigated a pragmatic foreign policy, balancing its reliance on US military cooperation with deep trade relations with China. However, increasing geopolitical tensions, including restrictions on semiconductor exports and defence alignments in the Indo-Pacific, pose new challenges for its strategic positioning.

“Singapore has always played a delicate balancing act,” said William Choong, a senior fellow at the ISEAS-Yusof Ishak Institute. “The challenge now is ensuring that our neutrality does not come at the cost of economic opportunities.”

‘Singapore will not be drawn into great power rivalries’ – FM

While Singapore’s diplomatic flexibility remains a strength, external pressures from the US and China could force more difficult choices. Singapore is diversifying economic partnerships, reinforcing regional trade agreements, and enhancing security collaborations through ASEAN frameworks.

Singaporean Foreign Minister Vivian Balakrishnan said “Singapore will not be drawn into great power rivalries, but we will continue to engage with all partners pragmatically,” according to The Straits Times reported, adding that the Wong administration is increasing diplomatic engagements to stabilise regional trade.

According to a report by the American Chamber of Commerce in Singapore multinational firms in Singapore are adapting to trade disputes and “80% of US firms in Singapore are evaluating supply chain diversification due to ongoing tariff disputes.”

Trade diversification key to future stability

While China has traditionally been the global manufacturing hub, rising geopolitical risks and cost pressures are accelerating the move toward ASEAN as companies seek to build more resilient and diversified supply chains.

ASEAN was founded with five member states in August 1967: Indonesia, Malaysia, the Philippines, Singapore, and Thailand. Since then it has expanded to include Laos, Myanmar, Vietnam, Cambodia and Brunei. It is headquartered in the Indonesian capital of Jakarta.

Nearly 60 years since ASEAN was founded, geopolitical tensions remain, and trade disputes are making businesses diversify from China to reduce exposure to potential risks from trade conflicts. Additionally, rising costs in China, including higher labour and production expenses, have led firms to seek more cost-effective locations. Moreover, the COVID:19 pandemic laid bare the vulnerabilities of concentrated supply chains.

ASEAN countries such as Vietnam, Thailand, and Indonesia offer alternatives due to lower labour costs, strategic locations and improved logistics. Additionally, many ASEAN governments are offering incentives to attract foreign direct investment.

Supply chains in ASEAN face issues of scalability, integration, regulatory differences and gaps in skilled labour and advanced manufacturing, but a long-term structural shift toward ASEAN could lead to a more balanced global supply chain and boost economic activity without fixing dependency on any single market.

“Trade diversification is key,” an American Chamber of Commerce in Singapore official commented. “Many US firms are now looking at Southeast Asia as an alternative to China, and Singapore is in prime position to benefit from this shift.”