CEOs balance tariffs and transformation in Singapore

CEOs in Singapore are navigating a complex global landscape marked by rising protectionism and the threat of international tariffs.

Yet, rather than retreating, a strong commitment to business transformation exists through bold strategies focused on innovation, resilience and regional diversification.

As global supply chains shift and trade tensions simmer, business leaders across the city-state are accelerating digital transformation, investing in artificial intelligence (AI) and expanding into fast-growing Southeast Asian markets.

These moves are not just defensive – they represent a proactive shift toward long-term competitiveness.

Yet it would be remiss to suggest such an approach is not without difficulty given current and escalating market volatility.

That’s according to the latest EY-Parthenon CEO Outlook Survey, which suggests that shifting trade and tariff policies will likely delay investment decisions in the short-term. Despite this however, the rationale for dealmaking prevails as CEOs take proactive steps to mitigate the impact and remain competitive.

“Singapore is an open economy that thrives on trade with access to markets across multiple regions,” observed Purandar Rao, Strategy and Transactions Leader across Singapore and ASEAN at EY-Parthenon.

“Hence, unlike countries that rely heavily on the US market, Singapore businesses may have less direct exposure to US tariffs, as reflected in their relatively lower levels of concern.”

According to Rao, Singapore’s economy is more weighted toward sectors such as finance, technology, logistics and services, which will likely face less direct impacts compared to economies driven by traditional manufacturing.

“That said, these sectors are still vulnerable to indirect impacts, such as the knock-on effects of a global decline in manufacturing, due to the interconnectedness of global supply chains,” Rao added.

“As there may be a time lag for these indirect impacts to play out, Singapore CEOs are likely to adopt a wait-and-see approach for their business strategies.”

Based on the data, 98% of CEO respondents (Singapore and global) are concerned about tariff increases affecting their company’s operations and sales in the next 12 months, with 38% of those surveyed in Singapore (global 50%) “very or extremely concerned”.

Unsurprisingly, geopolitical, macroeconomic and trade uncertainty are cited as the top risks to achieving growth – as cited by 35% of CEOs surveyed in Singapore. Also, 63% of local leaders have delayed a planned investment as a result.

But CEOs are responding proactively by rethinking global relationships:

• 53% of Singapore respondents (global 44%) are looking to adjust supply chain arrangements
• 38% (global 42%) are exploring product design innovations to reduce reliance on tariffed materials
• 38% (global 39%) are relocating operational assets to a different geography

The complexity of the current landscape is reflected in the fact that the most critical trading relationships are not always the closest or most locally significant, according to the survey.

While 42% of Chinese respondents cite the US-China tariff and trade dispute as their primary concern, 8% are more focused on the US-Mexico relationship. This underscores the global interconnections and difficulty of navigating tariff challenges, particularly as other major economies react to potential US tariffs.

CEOs prioritise cost reduction amid AI interest

While global CEOs report mixed results from AI deployments to date – which may slow down implementation in a turbulent year – executive leaders in Singapore appear to have a more “robust perspective” on their AI investments.

Also, while 42% of Singapore respondents (global 36%) plan to expand AI investments after positive results to date, 18% (global 25%) are “scaling back or reconsidering” spending in this space due to “unclear or disappointing” returns.

With nearly half of CEO respondents (Singapore 47%, global 42%) looking to absorb additional costs through operational efficiencies and cost reductions, many may be delaying technology investment pending more geopolitical certainty.

Also fueling a renewed and likely growing focus on cost management is the challenge of inflation. More than two-third (Singapore 68%, global 71%) of respondents agree that inflation continues to be a challenge and will be an issue they need to navigate for the next year, and many of those will be looking at opportunities to mitigate cost increases.

“AI and automation can help companies reduce operational costs by up to 30% and achieve efficiency gains by up to 40%,” outlined Joongshik Wang, Strategy and Execution Leader across ASEAN and Asia Pacific at EY-Parthenon.

“This can help companies absorb the impact of tariffs without solely relying on cost management. Additionally, the predictive analytics capability of AI allows for better forecasting, scenario planning and identification of new business opportunities, helping companies to respond proactively to market changes.”

M&A delivers value in times of challenge

Looking ahead, 53% of CEOs in Singapore are hoping to pursue mergers and acquisition (M&A) activity in the next 12 months.

But the report indicates that pre-existing pressures – technology adoption and a talent squeeze key among them – will remain pent-up transformation drivers that will see CEOs return to dealmaking as the market settles.

While reports of integration hurdles, cultural misalignment and overestimated synergies often lead to speculation around how much shareholder value is delivered post-deal, the survey tells a different story about the CEO experience.

More than half of CEO respondents (Singapore 66%, global 55%) say their recent acquisitions “met or exceeded” value expectations, with only 8% (global 2%) reporting value destruction.

“Times of uncertainty also present companies with great opportunities,” advised Luke Pais, Private Equity Leader across Asia Pacific at EY-Parthenon.

“With a clear strategy, disciplined execution and strong leadership, M&A remains a powerful lever to create long-term value, where companies can unlock synergies, preserve competitive edge, and drive growth well beyond short-term financial returns.”