In 2025, Taiwan overtook China as Singapore’s largest merchandise trading partner for the first time. According to Singapore’s Ministry of Trade and Industry, bilateral trade reached approximately S$170.3 billion (US$134 billion), ahead of Singapore’s trade with China (S$162.9 billion) and Malaysia (S$145.0 billion). One year earlier, Taiwan had ranked fourth. 

Singapore values Taiwan as a node in a diversified economic portfolio, but official diplomacy remains limited within the One China framework and Singapore has no incentive to revisit it.

The AI Boom

Much of the bilateral trade between Singapore and Taiwan involves the semiconductor industry. Both Taiwan and Singapore have heavily invested in their AI industries to take advantage of the global AI boom. Taiwan’s semiconductor industry accounts for over 60 percent of global foundry revenue and more than 90 percent of leading-edge chip manufacturing, while Singapore has built out its AI ecosystem to include public research, public service adoption, and diffusion into commerce and industry. 

In 2025, roughly 80 percent of Taiwan’s exports to Singapore were semiconductors and related products, while about 60 percent of Singapore’s exports to Taiwan consisted of semiconductor equipment and intermediate goods. The surge in trade runs both ways. Singapore’s non-oil domestic exports to Taiwan last year grew 37.4 percent – the strongest performance among its major trading partners. 

As both economies occupy different stages in the AI supply chain, they have formed a highly complementary and closely linked cooperative network in Asia’s AI industry chain. Taiwan fabricates the overwhelming share of the world’s leading-edge logic chips through TSMC and its foundry ecosystem. Meanwhile, Singapore supplies equipment, materials, assembly, advanced packaging, and test capacity, and operates as the regional logistics and headquarters hub through which chips and inputs circulate. 

Both parties have also implemented national AI strategies that will end up strengthening this complementarity. Singapore Prime Minister Lawrence Wong recently established a National AI Council alongside a series of national AI missions in advanced manufacturing, financial services, connectivity, and healthcare. Singapore also unveiled the world’s first governance framework for agentic AI at the World Economic Forum in January 2026, positioning itself as a standards-setter in AI. 

Concurrently, Taiwan has developed a Ten AI Initiatives Promotion Plan, an interagency effort that channels funding into silicon photonics, quantum technology, and AI robotics while building the infrastructure, talent, and capital to make Taiwan a “smart technology island.” Each set of measures raises domestic demand for end-use AI and embeds it in existing business models, feeding a cycle of rising demand and supply across both economies.

However, trade would never have scaled this quickly if the foundation hadn’t been laid years in advance. Under the agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Partnership (ASTEP), signed in November 2013, Singapore eliminated tariffs on all Taiwanese imports, while Taiwan phased out duties on nearly all Singaporean goods, including electronics, machinery, and chemicals. ASTEP also streamlined customs and rules of origin for electronics, protected covered investments against forced technology transfer and local-content requirements, and enabled digitally supplied services without requiring a local office. 

Meanwhile, Taiwan’s New Southbound Strategy, implemented under former President Tsai Ing-wen’s administration, leveraged Singapore as a regional platform for Taiwanese investment and technology to expand into ASEAN and South Asian markets.

Capital Flows

In addition to technological partnership, two-way financial flows between Taiwan and Singapore have shown significant increase. Taiwan’s economy grew 8.7 percent in 2025, its fastest rate in 15 years, and the Taiwan Stock Exchange Capitalization Weighted Stock Index (TAIEX) more than doubled to a total market capitalization of US$4.4 trillion. The combined wealth of Taiwan’s 50 richest individuals rose 56 percent in a single year to a record US$308 billion, up from US$197 billion. KPMG Taiwan and E.Sun Bank project Taiwan’s high-net-worth population at 124,000 in 2026, holding combined assets of NT$46.1 trillion (US$1.47 trillion).

Much of that capital is being invested abroad. Hong Kong, once the default for Taiwanese wealth, has lost its appeal as Beijing has tightened political control. Now Singapore is taking Hong Kong’s place in Taiwanese investment portfolios. More than 80 percent of Taiwanese offshore assets were once concentrated in Hong Kong, but today 60-70 percent are managed in Singapore, amounting to roughly US$326 billion. Singapore’s combination of political stability, low tax rate, mature private banking systems, and accessible residency pathways has made it the preferred alternative. 

In addition, Singapore ranked as the largest foreign investor in Taiwan from January to July in 2026 with US$8.66 billion, accounting for 62.2 percent of inward Foreign Direct Investment during the period.  

Taiwan and Singapore’s Strategic Outlook

While this unprecedented rise in trade owes in part to favorable economic tailwinds, it also reflects how both governments are managing national security and vulnerability in a region increasingly organized around geopolitical and technological competition. 

For Singapore, the relationship fits into its broader strategy of economic diversification, even as it rejects the idea of taking sides. Singapore has consistently resisted pressure to frame its choices as being either pro-American or pro-Chinese. Foreign Minister Vivian Balakrishnan described the objective as remaining “relevant” and “useful” to multiple partners, maintaining Singapore’s “strategic choice” and “strategic autonomy.” 

Deeper economic ties with Taiwan can therefore be understood within that framework. Singapore wants to participate in the AI economy through relationships that span Taiwan, China, the United States, Europe, Japan, and Southeast Asia rather than depending on a single technology bloc. Taiwan’s value to Singapore is that it serves as another high-value economic partner, particularly in a sector that will shape future economic and military power. 

Increased trade with Taiwan, however, doesn’t mean that Singapore is tilting away from Beijing. China is still Singapore’s second-largest merchandise trading partner, and the two maintain extensive political ties. Moreover, Beijing has generally tolerated Singapore’s substantive unofficial ties with Taiwan when they remain consistent with Singapore’s One China policy, only objecting when interactions appear to carry greater political symbolism. 

For Taiwan, maintaining key economic relationships remains important in preserving its relevance to the world. Under President Lai Ching-te’s administration, “active diplomacy” and economic “indispensability” are two pillars of an emerging Taiwanese grand strategy. By embedding Taiwan more deeply in its partners’ technology ecosystems, Taipei gives foreign governments and firms a material stake in its continued autonomy and cross-strait stability. 

Singapore therefore matters not simply as a buyer of high-end Taiwanese products, but as a regional financial, logistics, and manufacturing hub through which Taiwanese firms can extend their reach and remain central to Asia’s AI economy.

Nonetheless, Taiwan should not expect the diplomatic status quo to change. Singapore maintains firm support for the One China policy at the highest level. In October 2025, following a meeting with Chinese Premier Li Qiang, Wong’s office stated that Singapore “has a clear and consistent ‘One China’ policy and is opposed to Taiwan independence.” In January 2026, Senior Minister (and former prime minister) Lee Hsien Loong restated the same formula at the Regional Outlook Forum, saying that Singapore upholds the One China Policy and is “against Taiwan independence” and “against unilateral changes to the status quo.”

Showing the complexity of the relationship, even while trade booms, Taiwan and Singapore’s security relationship has been eroding. Project Starlight is a military training program established in 1975 under an agreement between Lee Kuan Yew and Chiang Ching-kuo that permitted Singaporean troops to train annually in Taiwan. This has historically been an open secret that both parties have kept low profile to avoid Beijing’s protest. However, since the Terrex seizure incident in 2016, in which Hong Kong customs impounded Singaporean infantry carrier vehicles that were to transit to Taiwan, the scale of the training has dropped to roughly 3,000 people. 

When Taiwanese media publicized details of Starlight exercises in Pingtung in May 2026, Nikkei Asia reported that the disclosure may itself have been a signal timed ahead of the meeting between the U.S. and Chinese presidents to convey wariness about any China-U.S. bargain struck over Taiwan’s head. Therefore, Singapore-Taiwan security cooperation now reads more as a bargaining chip than as a commitment, and could be a strain to Singapore-Taiwan ties writ large.

Singapore has traditionally been a trusted party to both Taiwan and China because it has deep commercial and cultural ties with both parties, and because it has never formally endorsed Taiwan’s sovereign status, which is a non-negotiable for Beijing. Singapore has used that position to cultivate the role of a trusted intermediary. It hosted the 1993 Wang-Koo talks, the first semi-official cross-strait negotiations, and the 2015 Ma-Xi meeting, the first encounter between leaders on the two sides of the Taiwan Strait since 1949. 

Singapore’s neutrality provides a third-party venue for cross-strait contacts, which raises Singapore’s international reputation as an honest broker. But this neutrality will face increasing pressure as cross-strait relations worsen.

The Singapore-Taiwan relationship is primarily economic and financial; Singapore cannot, and will not, become a defender of Taiwan’s international status. Despite that limitation, Taiwan’s rise to the top of Singapore’s trade ledger is real and durable. Taipei should continue concentrating on the areas where returns are tangible: semiconductor supply chain integration, trade, capital markets, and talent flows. It should not, however, treat Singapore as a latent diplomatic partner or a candidate for public statements of support.