Small Businesses in Singapore Hit by US Tariff Shock

For many small and medium-sized enterprises (SMEs) in Singapore, the US market has been a cornerstone of their revenue, with some reporting up to 90 per cent of their sales originating there. The removal of the de minimis threshold essentially erodes the competitive advantage these businesses once enjoyed, forcing them to absorb higher costs or pass them on to consumers. This situation is particularly challenging for sellers of lightweight, lower-priced items, where the added tariffs and increased shipping expenses can quickly eclipse the product’s value, rendering international sales unviable.

In response, SingPost introduced Speedpost Direct International, a delivery duty-paid (DDP) model that calculates duties and taxes at the destination and charges them back to the sender. This new service, while offering potential cost savings of up to 80 per cent compared to Speedpost Express, comes with a slightly longer delivery time of approximately eight days. For businesses like LingGlass, a handmade glass jewellery maker, where previous shipping costs were around $11.90, the alternative SpeedPost Express could cost upwards of $159 for a 2kg package, making it prohibitively expensive given her product price range of $25 to $120.

The adjustment period has been particularly harsh for businesses with highly niche products tailored to the US market. For instance, JCV Custom Works, which sells fishing lure stencils, relies almost entirely on US customers due to the niche nature of the hobby there. The owner noted that expanding into other markets is nearly impossible as customers outside the US generally prefer branded, pre-painted lures. This illustrates a deeper vulnerability for Singaporean businesses: a strong reliance on a single market, coupled with specific product-market fit, can become a significant liability when trade policies shift unexpectedly.

Small businesses are now confronting the stark reality of vastly increased operational costs. Beyond just tariffs, many alternative courier services are charging rates four to five times higher than previous averages. This surge in shipping expenses, coupled with the new duty requirements, necessitates a complete re-evaluation of pricing strategies, profit margins, and even overall business models. It also underscores the importance of supply chain resilience and diversification in an increasingly unpredictable global trade environment.

The shift towards DDP models and comprehensive customs brokerage services has become critical for ensuring smooth cross-border transactions. These services aim to reduce delays, rework, and unexpected costs that can arise from improper documentation or duty assessment. For businesses that previously managed simpler shipping processes, leveraging these new, more integrated logistics solutions is no longer optional but a necessity. The increased interest in such services, particularly from sellers of lightweight, low-price items, highlights the market's urgent need for compliant yet affordable shipping options.

Established global logistics giants like FedEx and DHL Express have also reaffirmed their capabilities, emphasizing that their express carrier operations are not impacted by the postal service suspensions. They continue to accept and transport US-bound shipments from Singapore, offering services that include estimations of total cost, including duties and fees. DHL, for example, offers its digital tool, MyGTS, to provide transparency on all charges, including customs duties, shipping fees, and insurance, reinforcing the need for businesses to accurately account for the full cost of international trade.

This adaptation in the logistics sector indicates a broader trend: the increasing professionalization of small-scale international trade. What was once a relatively simple process of shipping a parcel has evolved into a complex operation requiring specialized knowledge of customs regulations, tariff codes, and duty payment mechanisms. Singaporean SMEs are now compelled to either develop this expertise internally or rely heavily on third-party logistics partners who can provide end-to-end compliant solutions.

Diversifying market exposure is becoming an imperative. While the US remains a lucrative market, over-reliance on a single country, particularly one prone to policy shifts, presents significant risks. Singaporean businesses are now looking more critically at other international markets, evaluating the trade agreements, customs regulations, and consumer preferences in regions like Europe, Australia, and ASEAN countries. This strategic diversification aims to build a more resilient business less susceptible to unilateral trade policy changes from any single nation.

Moreover, the changes have accelerated the need for businesses to reassess their pricing strategies. Charging flat rates for international shipping, as some previously did, is no longer viable when costs fluctuate so dramatically. Dynamic pricing models, where shipping and duty costs are accurately reflected for each destination, are becoming essential. This may involve integrating sophisticated e-commerce tools that can calculate these costs in real-time at checkout, providing transparency to customers and protecting profit margins. The goal is to move towards a model where all costs, including the previously overlooked de minimis tariffs, are fully accounted for, ensuring long-term sustainability.

​Ultimately, the suspension of the de minimis provision serves as a powerful reminder of the inherent risks in global trade, especially for small businesses. It underscores the critical need for agility, adaptability, and continuous learning in an ever-evolving international economic landscape. Singaporean entrepreneurs must now not only be experts in their craft but also astute navigators of complex trade policies, logistics, and market diversification to thrive.