Confirmed but contained: Singapore's 12.5% US tariff takes effect, thesis intact

• US confirms 12.5% tariff on Singapore: The Section 301 forced-labour tariff took effect on 24 July 2026, raising Singapore's effective US tariff rate from 10% to 12.5%, broadly in line with expectations and confirming the proposal outlined in June.
• Overcapacity probe remains the key risk: While the forced-labour tariff is now settled, the separate Section 301 overcapacity investigation remains the biggest uncertainty. Singapore remains relatively well positioned as the US runs a goods trade surplus with Singapore, unlike many regional peers.
• Singapore's structural growth drivers remain intact: AI infrastructure spending continues to support Singapore's electronics sector, while capital flows into stable jurisdictions underpin the financial and insurance industries.
• Growth is broadening across AI export hubs: AI-related demand is driving explosive electronic export growth to both Taiwan and the US, with Taiwan edging ahead as the fastest-growing market in June.
• Maintain constructive outlook on Singapore equities: The tariff confirmation does not alter the long-term investment case. We maintain our STI target of 5,987 by end-2028 (7.3% upside plus ~4.2% dividend yield) and continue to favour the Amova Singapore STI ETF and iFAST-Amova Singapore Equity A SGD Fund for exposure to Singapore's structural growth story.

From proposal to policy

In our 2 June article, we flagged that United States Trade Representative’s (USTR) proposed Section 301 forced-labour tariffs would lift Singapore's effective US tariff rate from 10% to 12.5%, pending a hearing and negotiation process. That process has now run its course: the duties were confirmed via Federal Register notice and took effect on 24 July 2026, timed precisely to replace the expiring 10% global levy without a gap.

Related article: Contained and contested: Why Singapore's US tariff risk is smaller than it appears

The final structure mirrors what was proposed in June. Singapore sits in the 12.5% tier alongside the majority of the 60 investigated economies.

Countries assessed by USTR as already prohibiting and enforcing forced-labour imports, having committed to do so under an Agreement on Reciprocal Trade, or having implemented a partial compliance regime, including the UK, Canada and India, were confirmed at the lower 10% tier.

On the other hand, Japan, South Korea and Switzerland were capped at 12.5% under their separate trade agreements with the US. Carve-outs for fuel, food, fertilisers, autos, metals and pharmaceuticals were also confirmed, consistent with what we flagged as mitigating the near-term impact.

In short: little in today's confirmation changes the facts on the ground versus our June assessment. The main development is that a proposal has become policy — the magnitude and scope were already known.

The overcapacity probe is still the swing factor

Our June article identified the Section 301 overcapacity investigation — which names Singapore alongside 15 other economies — as the more significant forward risk, given it remained open-ended with outcomes ranging from tariffs to a negotiated settlement to no action at all. That remains true today. Today's confirmation was specific to the forced-labour track; the overcapacity probe has not yet produced a tariff proposal, and its resolution timeline remains unclear.

Singapore's mitigating case on that front is unchanged: the US runs a goods trade surplus with Singapore, not a deficit, putting Singapore at odds with the surplus-based framing that underpins the overcapacity investigation. This holds up regionally too: Taiwan, South Korea, Japan and Malaysia all ran large goods trade surpluses with the US in 2025, USD 146.8 billion, USD 56.4 billion, USD 63.9 billion and USD 30.8 billion respectively, putting Singapore in a relatively more defensible position, or a less obvious target, should bilateral trade balances become a significant factor in the investigation's outcome.

That said, Section 301 investigations weigh a broader set of criteria, including subsidies, state support, industrial policy and transshipment risk. Singapore has also previously faced scrutiny over transshipment, so this should not be read as an automatic exemption.

Singapore’s investment story remains intact

Markets had time to digest this outcome — USTR previewed the results in June, and today's implementation confirmed rather than surprised. While the tariff adjustment is now locked in, it does not represent a structural break in Singapore's growth trajectory.

The structural tailwinds we highlighted for Singapore are intact: the AI infrastructure capex cycle continues to support Singapore's electronics and precision engineering clusters, and capital reallocation toward jurisdictions with regulatory stability continues to flow through Singapore's financial and insurance sectors.

Singapore banks remain relatively insulated, as earnings are driven primarily by domestic and regional lending, wealth management, and treasury income. Any impact is therefore more likely to be indirect, through softer loan growth, or weaker fee income if risk sentiment deteriorates.

Similarly, S-REITs are driven predominantly by domestic property fundamentals and interest rate expectations, leaving them with limited direct exposure to tariffs. Their performance is likely to remain more sensitive to the path of interest rates and occupancy trends than to changes in global trade policy.

The greatest exposure lies within industrial and semiconductor-related companies, the same businesses benefiting from the AI investment cycle. These companies would be most vulnerable if the overcapacity investigation were to broaden, given its specific focus on semiconductor and electronics manufacturing. However, many of these companies continue to benefit from structural demand driven by AI infrastructure investment, which provides an important offset to near-term trade uncertainty.

More broadly, Singapore’s export momentum across the AI supply chain remains resilient and increasingly broad-based. Taiwan and the US have both continued to post exceptional export growth throughout 2026, reinforcing our view that global AI investment remains firmly intact.

Electronic NODX to Taiwan has grown unevenly but powerfully, reaching a fresh high of +278.2% YoY in June, while electronic NODX to the US has been similarly explosive over the same period, peaking at +303.0% YoY in May before easing to +228.9% YoY in June. South Korea has also grown strongly, from +69.4% in January to a peak of +214.1% YoY in April before moderating to +145.9% YoY in June.

Taiwan overtook the US as the fastest-growing destination in June. This is best read as the AI-driven export boom broadening across multiple markets.

Table 1: Singapore’s NODX and electronic NODX to US, South Korea and Taiwan

Electronic NODX (YoY%)	Jan 2026	Feb 2026	Mar 2026	Apr 2026	May 2026	Jun 2026
US	70.3%	94.9%	164.5%	224.0%	303.0%	228.9%
South Korea	69.4%	78.0%	112.4%	214.1%	175.5%	145.9%
Taiwan	111.5%	102.6%	157.5%	118.1%	218.6%	278.2%
NODX (YoY%)
US	-45.3%	-44.8%	-2.8%	59.6%	80.9%	36.7%
South Korea	31.6%	50.5%	44.1%	71.2%	67.2%	62.9%
Taiwan	33.2%	31.1%	63.1%	33.5%	135.2%	123.3%

Beyond the export growth trends above, Singapore's aggregate exposure to this tariff is also structurally limited: the US has historically absorbed only a stable minority of Singapore's total exports (a 10-year average of 14%), with Asia accounting for the majority (10-year average: 65%).

This is because the 12.5% tariff applies only to the US-bound leg of Singapore's trade; its aggregate impact on the broader economy is inherently constrained by how small that leg is relative to total exports, providing a structural buffer against the tariff's economy-wide impact.

Figure 1: Singapore’s exports are mainly to Asia, further mitigating the tariff impact

Related article: Singapore’s NODX continues to expand, further solidifying its economic resilience

Valuation and positioning

We therefore maintain our constructive view on Singapore. The confirmed tariff was anticipated and does not alter the investment case; the overcapacity investigation remains the item to monitor most closely going forward.

This underpins our unchanged STI target price of 5,987 by end-2028, based on 15x FY2028E price-to-earnings, reflecting an upside potential of 7.3% as of closing on 23 July 2026, alongside an average dividend yield of approximately 4.2%.

The STI’s strength is supported by multiple earnings drivers rather than a single theme. While AI-related electronics and industrials continue to benefit from structural demand, Singapore banks and capital markets provide additional, independent sources of support.

• Capital markets add a separate, strengthening thread: Securities Daily Average Value (SDAV) reached SGD 2.1 billion in June 2026, and MAS expanded the Equity Market Development Programme (EQDP) from SGD 5 billion to SGD 6.5 billion at Budget 2026, with roughly SGD 2.6 billion still to be deployed in the second half.
• Singapore banks continue to be supported by optimism ahead of the August earnings season, resilient wealth management income, and safe-haven capital inflows. Reflecting this strength, DBS became the first Singapore-listed company to surpass a SGD 200 billion market capitalisation on 13 July, with its share price up 27% YTD.

The broader index continues to benefit from diversified sources of growth, supporting our constructive long-term outlook.

Table 2: STI earnings table

STI	2025	2026E	2027E	2028E
PE Ratio (X)	15.2	16.4	15.2	14.0
Earnings growth (YoY%)	6.2%	11.9%	7.3%	9.0%
Projected Earnings Per Share (EPS)	305.0	341.3	366.2	399.1
Forward Dividend Yield (%)	4.7%	4.0%	4.2%	4.3%
Target Price (Based on 15X fair P/E Ratio)				5,987
Upside Potential (%)				7.3%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 23 July 2026

Figure 2: STI vs EPS chart

For investors seeking diversified exposure to this structural growth story, we continue to recommend positioning through the Amova Singapore STI ETF (SGX: G3B) for broad, low-cost exposure, and the iFAST-Amova Singapore Equity A SGD for investors seeking higher SMID-cap exposure beyond the STI 30 blue chips.

Related article: Singapore Outlook 2H26: Yield, growth and revitalisation in one market

Related article: Singapore banks: Higher expectations, dividend appeal remains intact

Related article: Q&A Series: iFAST-Amova Singapore Equity fund leads with a 61.31%* return over the past year

Declaration:

For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.

This research report was prepared with the assistance of artificial intelligence (AI) tools. iFAST Financial Pte Ltd does not rely exclusively on AI for content generation; the content of this report — including all investment theses, ratings, price targets and conclusions — has been independently reviewed and verified by the research analyst(s) to ensure accuracy and professional integrity.