US President Donald Trump’s plan to impose tariffs on steel and aluminum imports may cause a slowdown in the global economy, which will in turn affect developing countries, including Indonesia.
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Kompas/Totok Wijayanto
An employee checks rolls of steel at the Gunung Garuda steel factory in Cikarang, Bekasi, West Java. The national steel industry faces competition from imported products from China. The slowing steel industry may lead to the dismissal of workers.
JAKARTA, KOMPAS – US President Donald Trump’s plan to impose tariffs on steel and aluminum imports may lead to retaliation from affected countries. This may cause a slowdown in the global economy, which will in turn affect developing countries, including Indonesia.
Speaking at the Presidential Palace in Jakarta on Tuesday, Industry Minister Airlangga Hartarto said that the US’s steel and aluminum tariffs would trigger an influx of foreign steel and aluminum products to the Indonesian market.
Therefore, it was necessary for Indonesia to formulate effective measures to curb the expected influx of foreign steel and aluminum products.
Meanwhile, Investment Coordinating Board (BKPM) head Thomas Lembong said: "For Indonesia, the impact will be indirect. However, it should be anticipated, as it is part of global trade dynamics."
According to Lembong, under such a condition, Indonesia needed to further increase its economic competitiveness in order to be able to cope with trade barriers. "There is no other way, no shortcuts, but to increase [our] competitiveness," he said.
Separately, University of Indonesia economist Fithra Faisal Hastiadi said that the US import tariffs would spark retaliation from its trading partners. The counterattack, Fithra said, could trigger a global domino effect.
The countries that will be worst hit would be Asian countries, especially developing countries that rely heavily on international trade. "At least there will be a correction of 0.5-0.8 [percent] in the International Monetary Fund’s (IMF) projected global economic growth of 3.9 percent this year," said Fithra.
Indonesia, said Fithra, was a traditional trading partner of the US and China. The trade war between the two countries would also affect Indonesia. The slowdown in the global economy would cause a decline of a minimum 0.1-0.2 percent in the nation’s economic growth, Fithra added.
At the Trade Ministry’s directorate general of foreign trade, trade security director Pradnyawati said that although Indonesia was not the main supplier of steel and aluminum products to the US, the government was continuing to monitor the impact of the planned US import tariffs.
If the US went ahead with the plan, Indonesia could potentially be flooded with steel and aluminum imports from China, which would threaten the sustainability of the Indonesian steel and aluminum industry.
"In addition to steel and aluminum, the other products that may be subject to high import duties are electronics, textiles and clothing, and chemicals. US deficit with Indonesia is higher in these products than in steel and aluminum," said Pradnyawati.
A number of steel products are currently levied high tariffs due to the imposition of anti-dumping duties.
According to the Trade Ministry, the Indonesia-US trade was valued at US$25.91 billion in 2017, a 10.53 percent increase compared $23.44 billion in 2016. Indonesia enjoyed a surplus of $9.66 billion of the total trade.
World Trade Organization (WTO) director general Roberto Azevedo had earlier called on WTO member countries to prevent the domino effect that might ensue from the trade war. Azevedo also warned that trade retaliation and global trade recession might escalate as a direct impact of increasing protectionism.
The Japanese government also reminded the US that steel and aluminum imported from Japan had supported the US economy. According to Japanese Minister of Economy, Trade and Industry Hiroshige Seko, Japan had made a real contribution to the sustainability of the US economy.
He added that Japanese steel and aluminum products did not affect US national security.
In the US, public debate over the import tariff plan is heating up. Some politicians fear the policy will trigger a fierce trade war that would be detrimental to the American government and its citizens, and called on the White House to cancel the planned tariffs.
