In the latest move that has caused a stir in the United States, US President Donald Trump has just announced on April 2, 2025, the establishment of reciprocal tariffs for all imports to the US. The amount? Starting from 10% minimum. In addition, Trump also imposed higher tariffs on 57 other countries that have contributed to the US trade deficit. This counter rate is planned to be effective from April 5, 2025, with a higher rate effective April 9, 2025.
A Stomping New Fare Policy
This counter rate is not just an addition to the existing rate, you know! For example, on April 9, tariffs for China could reach 54%, which comes from 34% of the new countervailing tariff and the existing tariff of 20%. Well, interestingly, Trump decided to exclude Mexico and Canada from this policy.
Not only that, but certain commodities are also exempt from this tariff, including semiconductors, copper, medical goods, and pharmaceuticals. All of this shows how serious the impact of this policy is.
China’s Reaction and Thunderous Response
Just two days after Trump’s announcement, China seemed unwilling to lose. They responded immediately by imposing a 34% tariff on all products from the US, which will take effect on April 10, 2025. Furthermore, China will also restrict the export of rare earth metals to the US. Then, there was another threat from Trump, who said that the US would impose an additional 50% tariff if China did not cancel the retaliatory tariff.
On the other hand, China’s Ministry of Commerce insisted that it would “fight to the end” to protect its country’s interests. This situation created new tensions on the world stage.
EU Engages in Tariff Game
Not wanting to be left behind, the European Union also issued a proposal to impose a 25% countervailing tariff on some products from the US on May 16, 2025. This is in retaliation for tariffs that the US has imposed on steel and aluminum imports from Europe since March 12, 2025. If this conflict continues, its impact could extend to global trade relations.
Indonesia: Diplomacy in the Midst of a Trade War
Domestically, the Indonesian government stated that it would not take retaliatory steps, but chose the path of diplomacy to find a solution. Next week, Indonesia will send a team led by Finance Minister Sri Mulyani to negotiate tariffs issued by the US government. Given that the US is the second-largest export destination country for Indonesia, with export values reaching $26.3 billion during 2024, this move is crucial.
Major Commodities: What Does the U.S. Import from Indonesia?
Overall, here are the Top 5 commodities that Indonesia exports to the US in 2024:
- Electrical machinery and fixtures (cables and modems)
- Clothing and accessories (knitted and non-knitted)
- Footwear
- Animal/vegetable oils (palm products)
- Rubber and rubber products (such as tires)
Impact on the Market: What Happened to the JCI?
Meanwhile, on April 8, the JCI was recorded to weaken by around -7.9%, and the yield on 10-year Indonesian bonds rose 75 bps to 7.08%. As a result, the rupiah weakened by 1.9% to 16,865, marking its lowest level in history. Likewise, the S&P 500 index plunged -10.7%, followed by the Nasdaq and EIDO with significant declines.
Conclusion: The Endless Trade War
In general, this trade war has the potential to have a negative impact on Indonesian exports, both directly and indirectly. While there is an opportunity for Indonesia to gain market share from countries facing higher tariffs, it still depends on the negotiations that each country conducts with the US. Therefore, we must all continue to monitor these developments.
We advise investors to avoid panic selling and stay invested, especially if they believe that the stocks they own have good fundamentals. Remember, history shows that markets can recover from crises, as they did in 2008 and 2020. Additionally, diversifying portfolios across different asset classes can also help minimize the impact of market volatility. Consider investing in short-term government bonds or money market mutual funds to reduce the risk that may occur.