Manufacturing to remain cautious in H2 amidst ongoing tariff uncertainties

Chemicals and general manufacturing clusters expect declines in their production.

Business sentiments in the manufacturing sector remain largely cautious amidst the ongoing tariff uncertainties and trade tensions, with 85% expecting no significant change in the operating environment in the second half of 2025, according to a Singapore Economic Development Board (EDB) report.

Overall, 5% of manufacturing firms anticipate an improved business situation from July to December 2025 compared to the second quarter of 2025. Around 10% of manufacturers expect business conditions to improve, whilst 5% foresee a weaker business outlook.

Within the manufacturing sector, the electronics cluster is the most optimistic, with 17% of firms projecting improved business conditions in the next six months.

According to the EDB report, this is largely attributed to the semiconductors segment, which anticipates a seasonal pick-up in orders as well as sustained strength in AI-related demand, despite concerns over US tariffs that could be imposed.

Similarly, firms in the computer peripherals and data storage segment also project strong demand from data centres running AI applications.

The chemicals cluster was the most pessimistic among all sectors, with 7% of firms projecting weak business conditions in the six months ahead. This is because firms in the petrochemicals and other chemicals segments are concerned that trade policies could negatively affect export demand for their products.

Around 22% of firms in the general manufacturing cluster also anticipate a lower level of production in September. The projected decline is led mainly by the food, beverages & tobacco and printing segments, with the former expecting reduced export demand for beverage and milk products, alongside scheduled maintenance shutdowns.

On the other hand, the miscellaneous segment projects more orders for construction-related materials from the domestic construction sector.