It’s vital that the U.S. and China settle their trade differences to avoid damaging growth elsewhere in the world, Singapore’s finance minister said.

“It’s important for both sides to try and cut a deal because the impact on the global economy of any trade friction is going to be very negative,” Heng Swee Keat said in an interview with Bloomberg Television’s Haslinda Amin on the sidelines of the World Economic Forum meetings in Davos.

The world’s top policy makers and executives gather this week in Davos with the global economy at a turning point: the upending of trade frameworks and a cyclical slowdown in demand have prompted widespread downgrades of global growth. Another came Monday from the International Monetary Fund, though it left growth forecasts for the U.S. and China untouched.

Singapore is one of the most export-reliant nations in the world, and U.S.-China trade tensions and a slowing global economy are particularly worrying for authorities in the city state.

Economic growth held above 3 percent for a second year in 2018, and Prime Minister Lee Hsien Loong expects an expansion of 1.5 percent to 3.5 percent in 2019, with “major uncertainties” in the global economy and nervous financial markets weighing on the outlook.

Supply Chains

Heng, 57, is widely viewed as the de facto successor to Lee after being named the first assistant secretary-general of Singapore’s ruling political party in November. Lee has signaled that elections could be called as early as this year.

Heng said the trade tensions are prompting changes in how goods are manufactured and traded. “In the short run, many companies are really scrambling to look at how they can restructure the supply chain to make it a little more more resilient,” he said.

He also warned that trade stress is likely to persist.

“There will continue to be many sources of friction,” Heng said. “This is going to be a fairly medium- to long-term issue. There will be sources of disagreement on how things have to be done and how competition is to be conducted.”