Silver Lining?

Indonesia can weather Trump's protectionist trade policies: economists

By Sarah Yuniarni
Tuesday, January 31, 2017

The Indonesian economy can weather any possible protectionist trade policies that may be implemented by the new US administration, thanks to its stable economy, a director at the central bank said.

Juda Agung, executive director for economic and monetary policy at Bank Indonesia, said over the weekend that should the United States – as the world's biggest economy – implement a more protectionist policy, it will have a huge impact on its trading partners and the rest of the world. The United States was Indonesia's top export destination last year.

"What I know, is that the US president has the authority to impose unilateral trade policy measures against countries he considers having trade policies that do not benefit the United States," he said.

Juda was referring China specifically, which has been accused of devaluing its yuan currency against the US dollar to make Chinese goods cheaper.

President Donald Trump has been widely quoted in the media as saying that China is a currency manipulator.

Unilateral trade policies typically involve countries setting up trade barriers, such as tariffs, on imports.

Juda's comments came just after Trump's inauguration on Friday. The new president is widely known for his anti-globalization and protectionist sentiments.

However, Juda said Indonesia is likely to weather any possible protectionist trade policies imposed by the United States, as its economy is in a relatively better shape than neighboring rivals such as Vietnam, Thailand and China.

Mohammad Faisal, an economist at Jakarta-based research firm CORE Indonesia, said Indonesia's export products still offer competitive advantages in the US market, as cheap wages in the archipelago help to keep prices low.

Data from the Central Statistics Agency (BPS) show that Indonesia's main exports to the United States are dominated by a combination of commodities – such as rubber and shrimps – and non-high-tech manufacturing products – such as furniture, textiles and footwear.

Last year, the United States was the top export destination for Indonesian goods. BPS data shows that Indonesia's exports to the United States amounted to $15.7 billion, compared to $15.1 billion to China and $13.2 billion to Japan.

Indonesia's main imports from the United States are electrical goods, machinery, aircraft and agricultural products.

Prior to the Trump presidency, the United States already set up thousands of non-tariff barriers against its trading partners. World Trade Organization data show that the United States has 4,780 non-tariff barriers, compared to Indonesia's 272.

This article first appeared on the Jakarta Globe's website on Janauary 23, 2017.

Usage of the AmCham Indonesia website states your compliance of our Terms of Use