Indonesia fears global trade war 

Pinisi ships at the Sunda Kelapa harbour in Jakarta. Source: Wikimedia

President-elect Donald Trump’s protectionist promises are not expected to have an immediate impact on Indonesian exports, according to analysts, but they fear a trade war with China would have an indirect impact. 

Trump has blamed free-trade policies for the collapse of US manufacturing and has promised tariff barriers. Deciphering off-the-cuff remarks from policy commitments is clearly an ongoing challenge for anyone observing a Trump White House.

Indonesian stocks extended their slide this week to post their lowest close since July 11.

Maybank Indonesia economist Juniman said Trump’s promised protectionism would only be felt in the second half of 2017.

“It won’t affect us in the near future. Suppose he intends to implement such a policy, Trump will need time to negotiate with the US Congress,” Juniman was quoted saying by the Jakarta Post.

The Central Statistics Agency (BPS) said that the US was Indonesia’s largest non-oil and gas export destination this year, reaching US$13 billion from January to October, an increase of 0.5 per cent from the preceding year. Clothing, rubber, fish, minerals, coffee, wood and cocoa were among the main exports.

BPS deputy statistics boss Sasmito Hadi Wibowo said he expected the value of Indonesian exports to surpass US$140 billion by 2017, from US$117.09 billion last month, following the recent rise in commodity prices.

Juniman said while most of Indonesia’s exports could not be produced by the US domestically, an indirect impact could come from China, which is the archipelago’s other major trading partner. “If the US really sets high tariffs on China’s imported goods, China’s economy will face a slowdown and so will our economy,” Juniman explained.

Trump’s threats to slap tariffs of up to 45 per cent on Chinese goods could endanger one of the world’s key trading relationship.

China is the second largest market for Indonesian exports, receiving US$11.39 billion from January to October, rising by 3.4 per cent year-on-year.

Indonesian Institute of Sciences economist Latif Adam also pointed out that Asean’s largest economy helped supply the Chinese production network with raw materials.

The BPS said Indonesia exported US$1.17 billion worth of commodities to China from January to October, including coking coal, palm oil and ferronickel.

“If the protectionist policy is implemented by the US, Indonesia will be affected in the long run, especially in the sectors of mining, plantation, palm oil, rubber and cocoa,” Latif explained.

Indonesian exporters should more look for new destinations and strengthen the domestic market, he added.