On Friday, a senior Indonesian official announced that the country would impose an import tariff of up to 200 percent on a range of Chinese goods, in order to protect the country’s micro, small, and medium enterprises (MSMEs).
Speaking to reporters, Trade Minister Zulkifli Hasan said that the trade conflict between China and the United States had prevented China from offloading its oversupply on many Western countries. This has led it to redirect exports to other markets like Indonesia, threatening the country’s smaller businesses with “collapse.”
“The United States can impose a 200-percent tariff on imported ceramics or clothes; we can do it as well to ensure our MSMEs and industries will survive and thrive,” he said, the Antara news agency reported.
Reuters paraphrased Zulfikli by saying that the tariffs would range between 100 and 200 percent and that they “could affect imports of footwear, clothing, textiles, cosmetics and ceramics.” A senior Trade Ministry official said that the Indonesian Trade Safeguards Committee would determine the levels of the tariffs and the categories of goods that would be covered.
This is not the first move aimed at tightening control over imports. Last year, Jakarta issued a regulation creating import quotas for hundreds of products, including food ingredients, footwear, electronics, and chemicals. But the government was then forced to issue a number of revisions to the law, after Indonesian companies complained that the quotas gummed up supply chains, making it hard for them to obtain imported materials needed by domestic industry.
U.S.-based observers cited the news of the imposition of these significant tariffs on Chinese goods as an example that nations in the Global South share the U.S. government’s concerns about Chinese overcapacity. However, there are a number of key differences, the most obvious being that the issue has not been securitized in Indonesia to the extent that it has in the United States and other parts of the democratic West. It also involves basic items
In this case, it appears that Jakarta is concerned about the possible political blowback if a flood of Chinese imports pushes the country’s 64 million MSMEs to the brink of survival. The Indonesian government has a long track record of intervening in the economy, through subsidies, export bans, and other measures, in order to protect low-income Indonesians and promote the development of local industries.
As The Diplomat’s economics columnist James Guild noted, “a key priority for the government is to ensure that the price of staple goods – such as gasoline, electricity, rice, and cooking oil – remains stable and affordable.” It has sought to do this via a number of measures, including subsidies, export restrictions, and a mechanism known as a Domestic Market Obligation, under which producers of certain raw materials (such as coal) must provide a certain percentage of production to the domestic market at generally below-market prices. In line with this, the Trade Ministry last year banned e-commerce transactions on social media networks, dealing a major blow to the regional plans of the Chinese firm TikTok.
As such, the imposition of the tariffs is unlikely to disrupt the mutually beneficial aspects of bilateral ties between Beijing and Jakarta. China is currently Indonesia’s main source of imports, and its main market for exports, and a continued flow of trade and investment is a necessary component of the Indonesian government’s domestic economic agenda. In this sense, it makes sense to view the new tariffs as a means of adjusting the balance between domestic and international economic priorities, rather than as an expression of bilateral tensions.
As such, while Beijing will not be happy about the move, the broadly positive tenor of bilateral relations, as well as the desire to get off on the right foot with the incoming administration of Prabowo Subianto, suggests that it is unlikely to prompt a significant response.