Professor Warns: Trump’s Trade War Threat to Indonesia
Trump Tariffs threaten Indonesian Economy, Experts Warn
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JAKARTA – The Indonesian economy faces potential headwinds following the United States’ imposition of a 32% reciprocal tariff, economists caution. Didin S. Damanhuri, a senior economist and professor at IPB Bogor and Paramadina University, warns the tariffs could pressure the rupiah and Jakarta Composite Stock Price Index (JCI).
“The immediate impact will likely be a depreciation of the rupiah,” Damanhuri stated Wednesday. “The current rate of Rp 16,700 per U.S.dollar could easily surpass Rp 17,000 in the coming days, with further depreciation possible.”
Economic Slowdown Anticipated
Wijayanto Samirin, another senior economist at Paramadina University, anticipates a significant economic slowdown consequently of the tariffs. He believes international institutions like the IMF, World Bank, and OECD will soon revise their global economic growth projections downward.
Samirin also predicts increased global investment risk, triggering a “flight to quality” as investors seek safer havens such as gold, government debt securities, and hard currency assets.
“Many countries will feel the impact through trade and investment channels,” Samirin said. “World stock prices will likely become more volatile with a downward trend, and exchange rates in many countries will exhibit similar behavior.”
Impact on Indonesia’s Growth
For indonesia, Samirin believes achieving the aspired 5% economic growth target this year is increasingly unlikely. He expects the JCI to experience heightened volatility and a weakening trend,particularly in export-oriented sectors.
The rupiah is also expected to face downward pressure. Refinancing existing debt and securing new debt totaling Rp 800 trillion and Rp 700 trillion, respectively, will prove challenging due to the need for more attractive returns amidst severe market uncertainty, according to Samirin.
“Given that Indonesia’s exports to the U.S. are primarily labor-intensive industrial products – such as shoes, textiles, rubber products, and electrical equipment – layoff pressures will intensify,” he added.
negotiation Unlikely to Succeed
Regarding the government’s response, Samirin disagrees with calls for negotiation, noting that numerous countries, including India, Vietnam, and South Korea, with strong lobbying presences in Washington D.C., attempted negotiations before the tariff declaration but failed.
“Negotiation is not a viable option for indonesia, at least in the next one to two years,” Samirin explained. “The U.S. is in survival mode,and our lobbying capabilities are limited.”
Seven Steps for Indonesia
Samirin proposes seven immediate steps for Indonesia to mitigate the impact:
- Strengthen foreign exchange reserves to withstand a prolonged “currency war” by fully implementing Domestic Foreign Exchange (DHE) policies.
- Recalibrate the state budget,reducing wasteful spending to prioritize short-term programs that directly impact purchasing power and job creation. Stimulate domestic demand to offset potential declines in foreign demand.
- Tighten legal imports and entirely eliminate illegal imports to protect domestic producers and prevent revenue loss.
- Strengthen the financial services industry, particularly banking and capital markets, to act as a buffer against increasing global economic uncertainty.
- The government needs to instantly issue a concrete and realistic thorough policy and well -narrated. Various groups still have not seen clearly where the country’s economy will be brought by the prabowo government.
- Strengthen trade and investment cooperation with various countries by utilizing the sentiment “feeling of the same boat”, including with EU, ASEAN, India, the Middle East, even Africa and Latin America.
- Establish a negotiation team ready to engage with the U.S.when conditions permit.
“The leadership of President Prabowo and the cabinet’s unity will be tested not in pleasant times, but in turbulent conditions like these,” Samirin concluded. “The public awaits President Prabowo’s decisive actions to navigate these challenges.”
# Trump Tariffs and the Indonesian Economy: A Q&A Guide
## What are the Trump Tariffs and how Are They Affecting Indonesia?
The United States has imposed a 32% reciprocal tariff on goods from Indonesia. Economists warn that this could considerably impact the Indonesian economy. Didin S. Damanhuri, a senior economist, and Wijayanto Samirin, also a senior economist, have both voiced concerns.
## What is the Immediate impact of the Tariffs?
According to Didin S. Damanhuri, the immediate impact will likely be a depreciation of the Indonesian Rupiah (IDR).The current rate (Rp 16,700 per U.S. dollar) could easily exceed Rp 17,000 in the coming days, with further depreciation possible.
## how Could These Tariffs Lead to an Economic Slowdown?
Wijayanto Samirin anticipates a significant economic slowdown. He believes that international institutions like the IMF, World Bank, and OECD will revise their global economic growth projections downward.
## What are the Risks Associated with Global Investment?
Samirin predicts increased global investment risk, potentially triggering a “flight to quality.” Investors frequently enough seek safer havens like gold, government debt securities, and hard currency assets during such times.
## Will Indonesia’s Economic Growth be Affected?
Samirin believes it will be challenging for Indonesia to achieve its 5% economic growth target this year. He expects heightened volatility and a weakening trend in the Jakarta Composite Stock Price Index (JCI), especially in export-oriented sectors.
## What is expected to Happen to the Rupiah and Debt refinancing?
The Rupiah is expected to face downward pressure. Refinancing existing debt (Rp 800 trillion) and securing new debt (Rp 700 trillion) will be challenging because more attractive returns will be needed amid market uncertainty, according to Samirin.
## What Industries in indonesia are Most at Risk?
Given that Indonesia’s exports to the U.S. are primarily labor-intensive industrial products – such as shoes, textiles, rubber products, and electrical equipment – layoff pressures will intensify.
## Why is Negotiation with the U.S. Unlikely to Succeed?
Wijayanto Samirin disagrees with calls for negotiation. He notes that countries with strong lobbying presences in Washington D.C., such as India, Vietnam, and South Korea already tried and failed to negotiate before the tariff declaration. He believes the U.S.is focused on its own survival and that Indonesia’s lobbying capabilities are limited, making negotiation not a viable option in the next one to two years.
## What Steps Can Indonesia Take to Mitigate the Impact of the Tariffs?
Wijayanto Samirin proposes the following seven immediate steps:
- Strengthen foreign exchange reserves by fully implementing Domestic Foreign Exchange (DHE) policies.
- Recalibrate the state budget by reducing wasteful spending and prioritize programs that boost purchasing power and job creation. Stimulate domestic demand.
- Tighten legal imports and eliminate illegal imports to protect domestic producers and prevent revenue loss.
- Strengthen the financial services industry, especially banking and capital markets.
- The government needs to issue a clear and realistic policy.
- Strengthen trade and investment cooperation with countries like EU, ASEAN, India, the Middle East, Africa, and latin America.
- Establish a negotiation team to engage with the U.S. when conditions permit.
## How is the Leadership of President Prabowo Perceived in This Context?
Samirin emphasizes that President Prabowo’s leadership and the cabinet’s unity will be tested during these turbulent times. The public is waiting for Prabowo’s decisive actions to navigate these challenges.
## Summary of Potential Impacts
| Impact Area | Potential Effect |
|———————-|————————————————————————————-|
| Rupiah | Depreciation |
| JCI | Heightened volatility and weakening trend |
| Economic Growth | Achieving 5% growth target becomes increasingly unlikely |
| Investment | Increased global investment risk, “flight to quality” to safer assets |
| Employment | Increased layoff pressures, particularly in labor-intensive export sectors |
| Debt Refinancing | More challenging |
| International Institutions | Revision of economic growth projections downward |