How tariffs could shape interest rates in 2025: What Trump's 'Liberation Day' means for Singapore home loans

Let's talk about something that's quietly making waves in 2025: tariffs.

If you've heard the term "Liberation Day tariffs" floating around recently, here's the story. The US has rolled out an aggressive series of reciprocal tariffs under President Trump's administration-targeting China, Asean countries, and even long-time allies like Canada and the EU.

While it sounds like something that only affects governments and multinational corporations, the reality is that it could hit your wallet too.

Thanks to Singapore's deeply connected economy, these tariffs could ripple into interest rates, inflation, and ultimately, your mortgage.

What's happening with tariffs right now?

Here's a quick breakdown of what's been implemented so far:

• A 10 per cent baseline tariff on all imports to the US from all countries
• Up to 145 per cent reciprocal tariffs on Chinese goods (with China retaliating at 125 per cent)
• Targeted tariffs on steel, aluminium, semiconductors, automobiles, and pharmaceuticals
• Potential digital services taxes retaliation aimed at the EU, UK, and Canada

This sudden spike in trade protectionism isn't small. The scale and speed of implementation have thrown global trade into chaos. Some economists are even calling it "Obliteration Day," not Liberation Day.

So, what do tariffs have to do with mortgage rates?

This is where things get interesting.

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When tariffs are imposed, the cost of imported goods rises. These costs are often passed on to consumers, which drives inflation-not because demand is booming, but simply because everything costs more.

Typically, when inflation rises, central banks might hike interest rates to cool things down.

But here's the twist: this inflation is artificial, driven by policy rather than a booming economy. As a result, central banks like the US Federal Reserve are cutting rates to support growth instead. UOB now expects the Fed to implement three rate cuts in 2025, compared to just one before these tariffs came into play.

Possibly. But even if global rates start easing, don't expect an immediate effect on your mortgage. Banks tend to adjust slowly, and savings are not always passed on to borrowers right away.

Why this matters for homeowners in Singapore

Singapore is one of the world's most open economies-and we're heavily dependent on external demand, especially from the US

In a recent speech that went viral, Prime Minister Lawrence Wong stressed how vulnerable Singapore is to these shifts. He warned that rising protectionism could disrupt our export sectors, weaken investor confidence, and slow down overall growth.

UOB's research highlights a few key points:

• Singapore has the highest exposure to US demand (as a per cent of GDP) among Asean countries
• Growth downgrades are already underway for Singapore, Malaysia, and Vietnam
• A slowdown in US demand = weaker exports = potential economic cooling in Singapore

If the US enters a tariff-driven slowdown, it could place the Monetary Authority of Singapore (MAS) in a tough position: should they keep rates high to fight inflation, or lower rates to support growth?

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Will home loan rates in Singapore go down?

The US Federal Reserve is expected to cut rates, but mortgage rates in Singapore, particularly those tied to Sora, usually lag behind global moves.

On top of that, we're still navigating volatility from the post-2022 inflation period.

As of April 2025, mortgage rates in Singapore have been trending downward:

• Fixed rates are starting from 2.35 per cent
• Floating rates are starting from 2.43 per cent

Several factors are driving this:

• US Federal Reserve Rate Cuts: The Fed began cutting rates in September 2024 to boost economic growth.
• Excess Liquidity in Local Banks: Singapore banks are sitting on more deposits than loans, prompting aggressive competition to lend.
• Decline in Sora: Sora, the benchmark for floating rates, has dropped by about 0.5 per cent since the start of the year.

What's the outlook for mortgage rates in 2025?

It's hard to say.

On one hand, global tariffs could push inflation higher, making central banks cautious about further cuts. On the other hand, if tariffs escalate into a full-blown trade war and trigger a global recession, the Fed might be forced to cut rates further.

Locally, MAS's recent monetary policy adjustments reflect a cautious wait-and-see approach. Further developments from global trade talks and MAS policy decisions will be crucial in determining the next moves for mortgage rates.

Are more homeowners refinancing?

Yes-refinancing activity has picked up significantly.

With banks offering attractive rates and promotions, many homeowners are taking advantage to lower their monthly repayments.

This trend is especially strong among those who locked in higher rates during the previous interest rate spike.

Should you lock in a fixed rate now?

This really depends on your risk appetite:

• Fixed rates offer predictability and protection against future rate hikes.
• Floating rates could save you money if rates continue to fall-but there's uncertainty around the pace and depth of future cuts.

As David Baey, CEO of Mortgage Master, recently shared, there's a chance we could see mortgage rates fall below 2 per cent within the next six months, depending on how the global economy evolves.

However, it's also clear that the current environment is highly volatile, and a wait-and-see approach could mean short-term financial pain if floating rates remain sticky.

At the end of the day, it's important to assess your personal financial situation carefully.

What should you do next?

The global outlook is uncertain. Tariffs are shaking up markets. Inflation remains stubborn. Mortgage rates are moving-but not always in ways we expect.

In times like these, it's essential to get professional advice.

This article was first published in Mortgage Master.