The Ministry of Trade and Industry (MTI) lifted its forecast to 4.5%-5.5%, from its previous range of 2%-4%. It is the second upgrade this year, after the government initially forecast growth of 1%-3%.

The upgrade followed stronger-than-expected first-half performance. Singapore’s economy expanded 5.9% year on year in the second quarter, slightly ahead of the 5.7% advance estimate, taking the first-half growth to 6.1%.

Manufacturing was a major driver, expanding 12.5% in the second quarter, compared with 7.3% in the first. Growth was led by electronics and precision engineering as global demand for AI-related hardware remained strong.

Wholesale trade grew 8.3%, supported by higher sales of machinery and equipment, telecommunications products, computers, and electronic components. Finance and insurance expanded 6.2%, helped by stronger bank lending, fee income, and fund-management activity.

MTI said the global AI investment boom had been stronger than expected and was providing significant support to economies embedded in the global technology supply chain. Further increases in AI-related capital spending could provide additional momentum for Singapore during the rest of the year.

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According to data released by the Commerce Department, Uncle Sam’s trade deficit in goods and services fell 5.6% from the previous month to USD 73.3 billion, slightly above May’s revised level and broadly in line with market expectations.

Imports fell 1.8% to USD 388 billion, driven by a 2.5% decline in goods imports to USD 309 billion. Exports also eased, slipping 0.9% to USD 314.7 billion, with goods exports falling 1.9% to USD 206.9 billion after petroleum shipments retreated from record levels reached in May. Despite the monthly decline, both imports and exports of services hit record highs in June.

The figures come as the Donald Trump administration continues to pursue an aggressive trade policy aimed at reducing the US trade deficit through higher tariffs on imported goods. Last month, Washington imposed a fresh round of duties on products from more than 80 countries after the Supreme Court struck down an earlier version of the tariff regime.

While the administration views a smaller trade deficit as evidence of stronger domestic manufacturing, economists said the underlying picture remains mixed. Average monthly trade deficits since President Donald Trump returned to office have declined by around 6% compared with the previous 17-month period, but imports remain resilient in sectors where the US relies heavily on overseas suppliers.

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Demand for imported semiconductors used in artificial intelligence (AI) data centres, pharmaceuticals and other high-value products has remained strong. At the same time, businesses have continued to adjust purchasing patterns by stockpiling goods ahead of tariff changes, contributing to sharp month-to-month swings in trade flows.

Imports from China remain below pre-tariff levels, but shipments from Mexico, Vietnam and South Korea reached record highs in June, reflecting the continued diversification of global supply chains.

The broader geopolitical backdrop has also influenced trade. Disruptions caused by the conflict in Iran and the closure of the Strait of Hormuz reshaped global energy supply chains, boosting American petroleum exports while affecting shipments of fertilisers, packaging materials and helium.

Although the trade gap narrowed during June, it remained a drag on the US economy. Government data released last week showed that the widening deficit shaved a full percentage point off second-quarter economic growth, even as consumer spending and investment in AI infrastructure continued to underpin domestic demand.

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The EU said in a statement that they are keen to work with the US to establish a common ground for the respective aviation industries. 

Last month, the United States was granted an approval to slap tariffs on $7.5 billion worth of European Union imports. This marks the 15th year legal battle between Airbus and Boeing. 

The World Trade Organisation’s first compliance panel had found that the EU was not following the rules. Last year, Brussels had requested for a second panel to review into the matter, stating that it had modified its faulty behaviour. 

The panel found that the EU did not show that it had achieved the withdrawal of the French, German, Spanish and UK A380 LA/MSF subsidies, or the German and UK A350XWB LA/MSF subsidies, under  Article 7.8 of the SCM Agreement. 

According to media reports, the panel decision said, “The European Union and certain member states have not implemented the recommendations and rulings of the dispute settlement body to bring its measures in line with its obligations.”

Based on separate EU-led cases, the World Trade Organisation said that various divisions of the US government have given illegal subsidies to Boeing. However, the World Trade Organisation is expected to decide the number of retaliation rights the EU can impose next year. 

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Previously, China’s stimulus package was centered on infrastructure spend, but this year the focus is on new corporate tax cuts for non-state sectors. “The shape of the stimulus package this time is very different from earlier rounds,” Hong Kong-based HSBC economists Qu Hongbin and Julia Wang said in the HSBC report. “We believe that it will not only work, but will also trigger a self-sustained recovery in the coming quarters.”

Chinese politician Premier Li Keqiang said that the country has set its 2019 economic target at 6.0 percent to 6.5 percent which is lower than last year’s expectations. The country’s target for consumer price inflation is at three percent and its budget deficit goal is at 2.8 percent.

“What China can really do this year is to prevent deflation while stopping a recession and a hard landing in the economy,” Chen Xingdong, chief China economist at BNP Paribas, explained.

That said, there views are mixed as some economists remain skeptical of China’s data. “Whenever there’s a problem, Chinese data are meaningless,” said Derek Scissors, a resident scholar at the American Enterprise Institute. “The problem in this case is a clear economic slowdown over the last nine months. Nothing China publishes in this setting can be trusted.”

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In the meanwhile, India has raised taxes on 29 US-imported products including agricultural goods, iron and steel products, again in retaliation to US tariffs. The new duties are expected to come into effect from August 4, 2018 and expected to affect US almonds, walnuts and chickpeas, among others. India is a top buyer of US almond exports and so the move is expected to hurt American farmers.

The Trump administration announced in March that it would introduce tariffs of 25% on steel and 10% on aluminium imported into the US. After being deferred, the duties on steel and aluminium went ahead on 1 June and affect the EU, Canada, Mexico and other close US allies, including India.

The EU has introduced a 50% duty on goods such as footwear, some types of clothing and washing machines.
The US tariffs are a strong message from President Trump on trade exploitation and unfair business practices.

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