Many are voicing their deep concerns on disruptions in global supply chains and further pressures on the global economy. Such was the general global response to the latest development of the US-triggered trade war against China.
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BEIJING, TUESDAY – Many are voicing their deep concerns on disruptions in global supply chains and further pressures on the global economy. Such was the general global response to the latest development of the US-triggered trade war against China. Beijing has said that it will be prepared to retaliate over Washington’s new import tariff plans.
Japanese Finance Minister Taro Aso warned that global trade imbalances must be fixed to avoid another financial crisis. He also voiced Japan’s regret over the US imposition of new tariffs on China, saying that this may harm the global economy and lead to unintended consequences on other countries. Product sales of Japanese companies may also be harmed by disruptions in the global supply chains.
“The world\'s biggest and second largest economies must hold dialogue appropriately,” Aso said in Tokyo on Tuesday (18/9/2018). “Declines in trade volume means contraction of their economies, and the impact on other countries will become large.”
US President Donald Trump has gone ahead with his threat to impose a 10-percent import tariff on Chinese goods worth US$200 billion. The new tariff, announced earlier this week, will apply on Sept. 25, with a further plan of increasing it to 25 percent next year. The new tariff will be imposed on a wide range of goods, including voice data receivers, computer memory modules and automatic data processors. However, several goods, including smart watches and child safety products, have been taken off the list after they were included in July.
“We have been very clear regarding the changes that must take place and we have also given every opportunity for China to treat us more fairly,” Trump said. “However, so far, China has not shown any goodwill to change their trade tactics.”
For now, the continuation of US-China trade negotiations is up in the air. China has accused the US of inciting “the largest trade war in the history of economy” and pledged to retaliate by imposing import tariffs on US goods worth US$60 billion.
“To protect its legitimate rights and interests and the global free trade order, China has no other option than to retaliate,” the Chinese Trade Ministry said in a statement in Beijing.
Rupiah under pressure
Market players’ negative sentiments on the US-China trade war has put further pressure on the rupiah’s exchange rate. However, as banks and exporters released more US dollars, the rupiah strengthened at market closing time.
The Jakarta Interbank Spot Dollar Rate (JISDOR) found on Tuesday the rupiah depreciating 49 points to Rp 14,908 per US dollar. In the cash market, the rupiah was traded at Rp 14,855 to Rp 14,933 per US dollar.
Dean Ari Kuncoro of the University of Indonesia’s Faculty of Economics and Business said the central bank should mix its strategy of an interest rate increase with other policies, including the management of foreign exchange reserves and market intervention. Such a combination of policies may convince market players that the Indonesian economy is still conducive to conducting business.
Ari said that, in the face of a trade war, the management of foreign exchange reserves was the best way to reduce the rupiah’s volatility; afterwards, a proper increase of Bank Indonesia’s seven-day reverse repo rate (BI 7-DRRR) should be considered to strengthen BI’s market presence.