Trump's 19% Tariff Negotiations Still Harm Indonesia, Here's The Explanation

The Director of Economics at the Center of Economic and Law Studies (CELIOS), Nailul Huda, believes that the negotiations regarding the 19% US import tariff are still detrimental to Indonesia. 

Although reduced from the previous 32%, the agreement remains a trade gap between Indonesia and the United States. 

"Indonesian products are subject to a 19% tariff, while US products entering Indonesia are not subject to any tariffs at all and are free from non-tariff barriers," Nailul told Kontan.co.id on Thursday (July 17). 

Nailul reminded that previously, the average import tariff for US goods to Indonesia was only 5%-7%. If tariffs were waived, the government would not receive any revenue. Furthermore, domestic producers could be under pressure due to the increasing number of imported products from the US. 

Also Read: Hipmi Reveals Potential for Entrepreneurs to Hold Back Expansion After Trump's Tariff Decision 

On the other hand, Nailul also observed that several domestic industries are still not ready to compete globally. This situation will put pressure on domestic industries if the 0% tariff policy on US goods is implemented. 

"They won't be able to compete globally, and they will also be pressured domestically by imported products. One example is industries related to technology and digitalization," he explained. Besides the technology and digitalization sectors, Nailul predicts that electronic goods will be the item with the most significant increase in imports. The concept of digitalization in Indonesia only encompasses the use of technological goods, without necessarily becoming a producer of high-tech goods. Ultimately, the rapid flow of imports could impact Indonesia's trade surplus, which will further shrink. Indonesia's trade surplus with the US has been one of the largest in the country. 

If exports from the US slow down, on the other hand, increased imports from the US will also reduce foreign exchange reserves, impacting the weakening of the rupiah. 

Furthermore, Indonesia's agreement to purchase agricultural, fishery, and plantation goods from the US will also cause losses for local farmers and fishermen. "Furthermore, Indonesia's reindustrialization plan will also be undermined, causing our industrial development to lag further behind," he explained. 

Previously, United States President Donald Trump announced a list of commodities that Indonesia would import in return for agreeing to reduce reciprocal tariffs, from 32% to 19%. 

The imported commodities range from energy commodities to agricultural products, and even Boeing aircraft, which are US-made. According to Trump, Indonesia has committed to purchasing US$15 billion worth of US energy, US$4.5 billion worth of US agricultural products, and 50 Boeing jets, mostly 777s. Furthermore, he also requested that US exports to Indonesia be exempt from tariffs and non-tariff burdens. "Indonesia will pay a 19% tariff to the United States on all goods they export to us. Meanwhile, US exports to Indonesia must be tariff- and non-tariff-free," he said. 

Tag: CELIOS Donald Trump Technology And Digitalization