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Indonesia's tariff policy within the global political economy

The government's plan to impose a 200 percent tariff across the board on Chinese imports, while protecting domestic industries, risks unraveling its thread in the global political economic tapestry.

Virdika Rizky Utama (The Jakarta Post)
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Mon, July 8, 2024 Published on Jul. 7, 2024 Published on 2024-07-07T08:29:50+07:00

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Indonesia's tariff policy within the global political economy Thread of future: A weaver uses a loom on June 24, 2024 to produce traditional textiles at the Nusa eco-tourism village in Lhoknga, Aceh. (AFP/Chaideer Mahyuddin)

I

n a bold and possibly precipitous move, Trade Minister Zulkifli Hasan announced plans to impose a staggering 200 percent import tariff on Chinese products, notably textile products.

This drastic policy is intended to shield Indonesia's faltering textile industry from the deluge of Chinese goods that has flooded the country in the wake of the ongoing United States-China trade war.

At its core, the initiative echoes the age-old economic principle of protectionism: Shield now, but at what future cost?

Domestically, this move can be seen as a strategic political maneuver by Zulkifli and the government.

The textile industry, employing approximately 3.2 million people, is a major employer. By imposing such a high tariff, the government positions itself as a defender of local jobs and industries, a stance likely to resonate with voters and garner support from labor unions and workers struggling with the influx of cheaper Chinese products.

The rationale for such intervention seems straightforward: The Indonesian textile sector is teetering on the brink of collapse, barely maintaining its foothold above the contraction threshold with a purchasing manager's index (PMI) reading of 50.7. The influx of cheaper, surplus Chinese textiles threatens to push it into oblivion, jeopardizing the livelihoods of countless workers.

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In the short term, imposing tariffs is a necessary dam against this flood. However, the efficacy and ramifications of such a protectionist measure reveal a complex mix of potential economic hazards and diplomatic frictions.

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