Tanjung Priok port managed by Indonesia Port Corporation.

JAKARTA (TheInsiderStories) – Policy makers across Southeast Asia are turning their focus on bolstering their domestic markets to cushion the blown from the U.S and China trade war play out. That also includes Indonesia which has huge dependency on trade from the two giant nations.

U.S President Donald Trump said on Thursday (05/04) that he is ordering the the country’s Trade Representative to consider US$100 billion in additional tariffs on Chinese goods followed China’s proposal for an additional 25 per cent tariff on about $50 billion of U.S imports. This has escalated tensions between the world’s two-largest economies, rocking global markets and keeping officials on guard for ripple effects.

Indonesia’s Head of Investment Coordinating Board Thomas Lembong said the trade conflict may create a negative impact on Indonesia’s exports on biodiesel as well as the derivative product of Crude Palm Oil.

“But this is not yet time to panic in my view,” he said on April 4, adding the global economy is enjoying the strongest growth momentum since 2008.

For Indonesia’s iron and steel industry, the U.S policy might hamper the local industry, therefore, metal manufacturers would rely heavily on the government to help them contain the diverted steel exports from other manufacturing countries, especially China.

On the other hand, domestic steel manufacturers, along with iron and aluminium, should be able to reap more opportunities from the situation by further diversifying their products, even though high production costs still pose challenges. The European Union and Japan are in talks with the U.S for exemptions from the newly passed import tariffs.

However, Trade Ministry‘s foreign trade director general Oke Nurwan said Indonesia would not be affected much by U.S metal tariffs as the former did not export a significant amount of such products to the country.

Indonesia’s iron and steel exports amounted to $1.83 billion in 2016, while overseas shipment to the U.S totaled only $26.26 million, according to the latest data from the Geneva-based Trade Map.

However, Ministry of Trade was aware of the indirect impact of the policy that may come in the form of an influx of metal imports from other countries.

“What will bother us is when key metal producers try to find other markets to sell their products (outside the US),” said Nurwan, referring to Asian manufacturers, such as from China.

For now, the government’s focus was to balance Indonesia’s need for metal products to support massive infrastructure projects and the interests of local manufacturers.

In April 2017, the U.S administration put Indonesia on its trade watch list along with 15 countries as the former had suffered a significant deficit and aimed to step up its measures against trade imbalance.

Indonesia posted a $9.67 billion surplus from its trade with the U.S in 2017, a 9.3 per cent increase in year-on-year calculation, according to data from the Trade Ministry.

Email: elisa.valenta@theinsiderstories.com