Jakarta sees opportunity in US-China trade war

Trade turmoil: A shipping container being loaded in Tanjung Priok Port, Jakarta. Business officials say Indonesia’s key exports do not currently meet US needs. — Bloomberg

JAKARTA: The government says Indonesia may benefit from Washington’s newly introduced tariffs on Chinese goods, but businesses beg to differ, warning that Indonesian export goods were not ready to meet US demand.

Coordinating Economic Minister Airlangga Hartarto told The Jakarta Post on May 17 that Indonesia might snatch some of the US market share that otherwise would have been claimed by Chinese exporters and that Jakarta would try to maximise critical mineral exports. “Yes, for the goods affected by the US policy, we can get them into America. The opportunity is big, it’s big,” said Airlangga.

Last week, US President Joe Biden announced massive increases in tariffs on electric vehicles (EVs) and semiconductors from China, accusing Beijing of “cheating” rather than competing.

The US government claims China is pushing its industries by subsidising strategic sectors to undercut foreign competitors and produce more than the world can absorb.

China denies that accusation and says its manufacturers are simply working efficiently. AFP wrote that the measure was taken on account of Biden seeking to win over blue-collar voters in swing states by looking “tough on trade” ahead of an election rematch against Donald Trump in November.

US Treasury Secretary Janet Yellen urged the European Union to follow suit last Tuesday, and The Guardian reported that European Union (EU) Commission president Ursula von der Leyen hinted Brussels was doing just that.

The US measures would quadruple tariffs on Chinese EVs from 25% to 100% this year, while those on semiconductors are set to double from 25% to 50% by next year.

Estimated to hit a total of US$18bil worth of Chinese imports, the policy also covers sectors like batteries, critical minerals and medical products. In response, Beijing vowed retaliation with Chinese Foreign Minister Wang Yi saying the US had “reached a point of losing their minds” and called the measure “a typical form of bullying”, Reuters reported.

Yesterday, a few days after Wang Yi’s remarks on the tariffs, China’s Commerce Ministry launched an anti-dumping probe into engineering plastic imported from the United States as well as from the EU, Japan and Taiwan – Washington’s close allies.

By reducing imports from China, the US tariffs are expected to provide an opening for producers in other countries to fill the void created in the US market, and Airlangga’s statement shows Jakarta intends to jump onto the bandwagon.

Indonesian businesses, however, do not share Airlangga’s optimism. Shinta Kamdani, chairwoman of the Indonesian Employers Association, told the Post lastTuesday that it was true that the opportunity was there, but taking advantage of it through real exports was a tall order, since Indonesia’s key export goods did not match US demand.

She pointed out that when the US-China trade war began under the Trump administration, Indonesian exports to the US stagnated or grew just a few percentage points, as was expected regardless of US-China effects.

Vietnam, however, experienced “fantastic” export growth, rising to 35% during that time. Shinta explained that Vietnam had achieved that thanks to its capacity to produce semi-processed manufacturing goods for the United States, a role that China had played in the past.

Indonesia’s exports to the United States have barely changed over the past 10 years and remain dominated by raw materials and simple consumer goods – a far cry from the high-tech products made in China that are now subject to the escalated US levies. “So, if Indonesia cannot produce these products in compliance with the standards and parameters expected by the US market, well, we will not be able to exploit the market share created by US tariffs on China,” said Shinta. — The Jakarta Post/ANN

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Trade war , Indonesia , China , supply , export


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