Credit: PT Sri Rejeki Isman

JAKARTA (TheInsiderStories)–The US President Donald Trump’s threat over Indonesia’s trade surplus with the US would bring negative impacts to Indonesian publicly listed textile companies.

The Advisory Council of the Indonesian Employers Association Sofjan Wanandi said Trump has already delivered a warning for Indonesia and plans to withdraw Indonesia’s special treatment in trade. The Trump’s threat in order to prevent the US from flooding Indonesia’s goods.

“He [US] offhanded, including to us [Indonesia]. Trump has given us a warning and we talk to him about some rules about the special tariff treatment the country gives to us, especially for the textile,” he said on Thursday (5/7).

Trump’s threat to Indonesia’s textile company shrunk the textile companies listed on the Indonesia Stock Exchange (IDX). PT Sri Reject Isman (IDX: SRIL) weakened 8 basis points or 2.48 per cent to Rp314 at 11.04 a.m. today (6/7).

In addition, the Jakarta-based multinational textile company listed in IDX PT Eratex Djaya weakened 40 basis points or 32.7 per cent to Rp82 at 9.33 a.m. PT Panasia Into Resources (IDX: HDTX) down 4 basis points or 1.40 per cent at Rp282 at 10.35 a.m. Furthermore, PT Indo-Rama Synthetics (IDX: INDR) weakened 250 basis points or 3.83 per cent at Rp6,275 at 11.12 a.m.

Wanandi give advises to Indonesia’s businessman to remain vigilant and focus on their business. He also requested that entrepreneurs in general not be too worried, because the impact of a feared commercial war will not immediately, but afterward.

The Trump’s threat over Indonesia is reasonable as the country recorded deficit in trade balance with Indonesia. In 2017, Indonesia booked US$9.59 billion trade surplus with the US.

The President of World Bank Jim Yong Kim earlier warned Indonesia to prepare for the trade war.

“Indonesia just like any other economy has to be prepared, and we feel that Indonesian economy and the management of the economy is among the models for the entire world,” he said after the meeting with Indonesian President Joko Widodo on Wednesday (4/7).

The trade war potentially shifted the exports of the two countries to Indonesia. China potentially shifts the steel and aluminum exports to Indonesia, while the US will seek the new markets for fruits and soybeans.

The condition will worsen Indonesia’s trade deficit. According to the Central Statistics Agency data, Indonesia booked US$13.89 billion deficit in non-oil and gas trade balance deficit to China. Indonesia recorded US$21.32 billion in export to China, lower than the import from the country of US$35.51 billion.

In addition, the trade war potentially reduce the volume of the global trade that will hurt Indonesia’s export-oriented industries including palm oil, rubber, textile, food and beverage, and electronics. As a result, it will worsen the country’s trade deficit.

Furthermore, the trade war will exacerbate the rupiah exchange rate against the US dollar as the investors shift to the developed countries currencies. The weakening rupiah simultaneously increases imported raw material that will cause higher production cost. Not only hurt the local industries’ competitiveness, it also potentially harms the people’s purchasing power.

Given the implication of a full-blown trade war could be extensive, the government does not seem to have definite anticipatory measures to minimize its impact.