You will be able to trace a tariff from the targeted product to suppliers, competitors and currencies.
On 2 April 2025 the US announced sweeping new tariffs on imports from most of its trading partners. Over the next few days shares fell hard around the world, including in Singapore. On 9 April the US paused the higher rates for most countries for 90 days, and shares jumped. Marcus watched his account swing by thousands of dollars in a week, and realised he couldn't say which of his holdings were actually exposed to tariffs and which had simply been caught in the selling. This lesson gives him a way to tell.
A tariff is a tax on imported goods, paid by the importer when the goods cross the border. The first-order effects fall on two groups.
The importer pays the tax and has to decide how much to pass on. Some of it reaches customers as higher prices, some comes out of the importer's margin, and some may be pushed back onto the foreign supplier as a lower price.
The exporter of the targeted goods sells less, or sells at a lower price to stay competitive. If the tariff is large, some exporters lose the market entirely.
These effects are the easiest to see, and markets price them within hours. When the US raised tariffs on many Chinese goods from 2018, Chinese exporters of those goods and US importers that relied on them were the first to show the damage.
The effects that last longer are usually second-order, and they take longer to appear.
Supply chains get rerouted. After the 2018 tariffs, many companies shifted final assembly of goods bound for the US out of China to countries such as Vietnam and Mexico. Companies with factories in those countries gained orders. Companies that had to pay to move lost margin for a while.
Trading partners retaliate. China responded to the 2018 tariffs with tariffs of its own, including on US soybeans, and US soybean exports to China fell sharply. A tariff on one product can turn into a loss for a completely different industry in the country that imposed it.
Currencies move. A country facing tariffs on its exports may see its currency weaken, which offsets part of the tariff for its exporters. China's yuan weakened through 2018 and 2019 and crossed seven to the US dollar in August 2019, during an escalation.
Demand slows. Higher prices and uncertainty can cause companies to delay investment and households to spend less, and that slows trade volumes for everyone, including countries not directly targeted.
News coverage names the countries and products. To see what it means for a company, go to its own filings. Risk factors in an annual report or 10-K describe tariff exposure when management thinks it matters. Segment notes show revenue by region and sometimes cost of goods by source. Results announcements and earnings calls in the quarters after a tariff change often give the most specific numbers: how much the tariffs cost, what share was passed to customers, and what the company is moving.
Marcus checked his holdings. His US chip designer's filings described tariffs on imported components and on finished products crossing several borders, with assembly in Asia and customers worldwide. His SGX supplier's annual report showed most revenue billed to customers outside the US, which limited the first-order hit, but its customers sell equipment into US and Chinese fabs, which left it exposed to second-order effects through their orders.
Singapore's total trade in goods and services is a multiple of its GDP. The port, the airport, the logistics firms, the banks that finance trade and the manufacturers that export from here all depend on global trade volumes. Marcus works in logistics, so he sees it in his own company's volumes before it shows up in any statistics.
That means a tariff dispute between two other countries can hit Singapore-listed companies and the Singapore economy even when Singapore isn't named. Slower trade means fewer containers through the port, less trade finance for the banks and weaker demand for the region's exporters, which shows up in the STI. Lesson 4.6, Singapore's exposure as a trade and financial hub, follows this through.
The first-order effects are where markets look on the day. The second-order ones are where long-term earnings change, and where an analyst who has traced the chain can see what the headlines miss. Pick a recent tariff announcement and trace it the same way: the first-order effect, then at least two second-order ones, for companies you could own.
Take one recent tariff announcement and write its first-order and two second-order effects on companies you could own.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).