JAKARTA (TheInsiderStories) – Good morning. The government had finally revealed a list of 1,147 items slapped with higher import tariffs as a short-term response to counter the might of the dollar.
The government raised import tariffs on 719 items to 7.5 per cent from 2.5 per cent, 218 items to 10 per cent from 2.5 per cent and 210 items to 10 per cent from 7.5 per cent. These 1,147 items accounted for imports worth US$6.6 billion in 2017 and $5.0 billion in January to August this year.
Imported consumer goods like shampoo, soap to luxurious car now get 10 per cent tariffs. The government, though, keep import tariffs at 2.5 per cent for 57 imported raw materials necessary for manufacturing industry.
Finance Minister Sri Mulyani Indrawati said the list of imported goods slapped with higher tariffs was decided after a thorough analysis and its impact on economy growth.
The government is scrambling for responses as the US dollar continue to display its might on the combination of the Federal Reserve’s monetary tightening, the US’s widening fiscal deficit and trade war with key economies like China and the European Union.
For Indonesia, the downside pressure was further affected by investors’ risk-off sentiment on emerging market assets due to ongoing financial crisis in Turkey and Argentina and economic contraction in South Africa.
The Rupiah ended down at 14,927 per US$1 on Wednesday (06/09), making it eight straight days of losing streak. Foreign investors pulled out Rp877 billion (US$60.48 million) from the equity market, pushing the Jakarta Composite Index lower by 3.8 per cent at 5,683.
However, despite the government’s effort, pulling out the Rupiah from spiraling further seems like an uphill battle as new negative development for Indonesia takes place almost every day.
This time, there is a renewed concern that the US President Trump may further escalate the tariff war with China with additional import tariffs on US$200 billion worth of goods as soon as Friday (31/08).
And, given the last US trade statistics, there is little reason for Trump to dial back his plan. The US Commerce Department announced that the US’s trade deficit widened to $50.1 billion in July from $45.7 billion in June.
Further, the trade deficit with China rose 10 percent month-on-month to $36.8 billion in July, reinforcing the narrative by Trump that the US need to impost tariffs on Chinese goods to protect its economy and seek a more balance trade relations.
Moving away from the economy, the ruling coalition had announced that businessman Erick Thohir will lead the team for President Joko Widodo’s re-election bid in the 2019 Presidential Election. Thohir’s latest exploit was as the head of organizing committee of the recently-ended 18th Asian Games, which was seen as largely a successful event.
However, Thohir, who is a friend of Sandiaga Uno, a Vice President candidate from the opposition camp, has relatively few experiences in politics which could be handicap as he seeks to navigate and lead a large coalition of political parties behind Widodo’s re-election bid.
May you have a profitable day.
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