Trade boost: People sit near street food vendors in Jakarta. Raden says the US-China de-escalation could translate into lower reciprocal tariffs worldwide, “because the main cause of the tariff war is the competition between those two big countries”. — AFP
JAKARTA: The government views the apparent de-escalation in a trade war between the United States and China as an opportunity to demand open and fair trade in its own negotiations with a highly protectionist US administration.
Washington and Beijing announced in a joint statement on Monday that they had agreed to bring triple-digit import tariffs on each other’s export goods down to two figures and continue negotiations.
The US government agreed to bring down its fresh duties of 145% on many imports from China to 30%, while China, which had retaliated by imposing 125% tariffs on US-made products, agreed to reduce the duties to 10%, according to US President Donald Trump.
Those rates are to apply for 90 days as the two sides work on a long-term agreement.
Finance Ministry spokesperson Deni Surjantoro told The Jakarta Post on Tuesday that the development “underlined the effectiveness of diplomacy and negotiations in taking down trade barriers”.
The ministry is among three institutions spearheading bilateral talks with the White House to avert a 32% import tariff threatened to be imposed on most Indonesian products exported to the United States.
The exorbitant levy, described by Washington as a “reciprocal” measure, took effect on April 9, but its enforcement was suspended hours later for a 90-day period to provide time for bilateral negotiations.
The spokesperson said the ministry viewed the latest developments between China and the United States as a “de-escalation” that would have a “positive impact” on global trade and investor sentiment.
He went on to say that the easing tension would improve supply chains and may even shift global trade in “a more diversified but still interconnected” direction.
“In terms of future negotiation, (the de-escalation), of course, is a pretty good signal. Indonesia can take advantage of this momentum to strengthen its bargaining position in multilateral or bilateral forums, push for more open and fair trade, as well as ensuring that national interests are safeguarded amid the ever-developing global dynamics,” said Deni.
Raden Pardede, an official at the Office of the Coordinating Economic Minister, the institution helming the Jakarta delegation dispatched to Washington last month, said the US-China de-escalation could translate into lower reciprocal tariffs worldwide, “because the main cause of the tariff war is the competition between those two big countries”.
He told the Post on Tuesday that the preliminary deal carved out by Beijing and Washington could become a benchmark for Jakarta in its own tariff negotiations with the US government.
However, “Trump’s moves remain unpredictable”, Raden said, which was why the government would be on its toes and remain ready to mitigate and react to any “unexpected action”.
Indonesian Employers Association chairwoman Shinta Kamdani suggested on Tuesday that the tariff landscape was evolving too rapidly to make out any universal connecting thread.
“I do not know, every time I follow (the developments), I’m never sure how long anything will last.
“One may say one thing tomorrow and whatnot, and other countries may say otherwise,” said Shinta, adding: “In my opinion, we must not be overly dependent on unclear deals”.
She said the archipelago had to be ready to anticipate the unexpected with regard to the global situation, and, in the meantime, the focus should be on fixing waning consumer spending within the country.
“It is not that exports are unimportant; they’re important.
“But (fixing domestic consumption) is our homework,” said Shinta.
Household spending, which consistently accounts for over half of Indonesia’s economic activity, has lagged behind overall gross domestic product (GDP) growth in recent years.
Bank Permata economist Faisal Rachman pointed out in a media briefing on Wednesday that, despite the latest agreement, the duties imposed by the United States and China on each other’s products were still higher than before the tariff war began.
He said that that would impact Indonesia’s GDP growth “indirectly” on account of slowing demand from China, the archipelago’s largest trade partner.
The “direct effect” for Indonesia, said Faisal, would mostly play out in seven industries that relied heavily on the export market, particularly the US market, with little scope to redirect sales to the domestic market.
The vulnerable industries, according to Faisal, were textile and wearing apparel; rubber and products of rubber and plastic; metal products, computer, electronic, optical and electric equipment; wood, articles of wood and woven goods of bamboo, rattan and the like; machinery and equipment; furniture and other manufacturing as well as; leather, leather products and footwear.
Speaking to reporters after the same Wednesday briefing, Bank Permata chief economist Josua Pardede said “if the Chinese and US governments have begun to soften their respective positions”, then Washington could be more conciliatory toward Jakarta.
However, he surmised that Beijing, to reach that point, offered a package of concessions Trump could not resist, meaning a heavy emphasis lay on offers made during negotiations.
Given his view that Trump ultimately wanted investment on US soil to reinvigorate US industry, Josua said Jakarta’s offers, which included a US$2bil investment in a blue ammonia project from Indorama, was “a proposal Trump could not refuse”. — The Jakarta Post/ANN
