Indonesia’s Textiles Exporters Brace for Trump's Trade War

US President Donald Trump has warned that he may revoke special trade tariffs for Indonesia, especially on textiles, in a bid to reduce his country's trade deficit, an official said on Thursday (05/07). (Reuters Photo/Darren Whiteside)

By : Adinda Normala | on 11:32 PM July 05, 2018
Category : Business, Featured, Trade

Jakarta. US President Donald Trump has warned that he may revoke special trade tariffs for Indonesia, especially on textiles, in a bid to reduce his country's trade deficit, an official said on Thursday (05/07).

The United States was Indonesia's second-largest export destination last year, at 11 percent of total exports, or $17 billion. Indonesia enjoyed a surplus of $9.59 billion.

"[Trump] is now doing as he wishes, including to us. He has warned us that we cannot export more than the United States. He has warned that there are several special tariff arrangements that will be revoked, especially on textiles," Sofjan Wanandi, chief advisor to Vice President Jusuf Kalla, said during a discussion on Thursday (05/07).

Indonesia exported textile products, both knitted and unknitted, worth a total of $4.12 billion to the United States last year.

According to Industry Ministry data, the United States currently imposes import tariffs of between 5 percent and 20 percent on Indonesian textile products, while there are no tariffs on textile imports from Vietnam.

Sofjan, who recently visited the United States to meet with officials, said it is uncertain what Trump will do in the near future as "no one understands what he actually wants," he said.

According to Sofjan, who is also advisory board chairman at the Employer's Association of Indonesia (Apindo), the US economy is currently thriving, which enables Trump to create and change trade policies as he considers most beneficial.

"We don't know when Trump will start the trade war; maybe tomorrow, maybe never," Sofjan said.

Retaliation

Ade Sudrajat, chairman of the Indonesian Textile Association (API), emphasized that Southeast Asia's largest economy needs to retaliate soon if a higher tariff is enforced.

"If [a higher tariff] is imposed, it will be a huge obstacle for the textile industry, so it must be countered. If we keep quiet, then we become the losers," Ade told the Jakarta Globe, adding that Indonesia's large imports of agricultural products from the United States could be used as a bargaining chip.

Indonesia imported agricultural products worth $1.27 billion – mainly seed oil, fruits and medicinal plants – from the United States last year, followed by equipment and machinery, animal feeds and cotton.

Indonesian textile exports rose 4.4 percent to $12.4 billion last year, exceeding the API's target of $11.8 billion and the Industry Ministry's $12 billion.

The ministry has set a textile export target of $13.5 billion for this year and $15 billion for next year.

The number of people employed in the textile industry increased 17 percent last year to 2.73 million, compared with 3.3 million in the processed food and drinks industry and 3 million in the automotive industry. The ministry seeks to increase the number of people employed in the textile industry to 2.95 million this year and 3.11 million next year.

According to the Trade Ministry, total investment in the nation's textile industry amounted to Rp 10.9 trillion ($758 million) in 2017. Indonesia produced about 2 percent of the world's textile supply, which earned the country $11.87 billion in foreign exchange.

"It will be unfair for us if the textile industry is targeted and the government prefers to do nothing," said Ade of the API.

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