RI Gets Trump Tariff 19 Percent, DEN: We're Not Giving Red Carpets

JAKARTA The National Economic Council (DEN) expressed its appreciation for Indonesia's successful economic diplomacy in agreeing to reduce additional tariffs on export products to the United States (US).

For information, US President Donald Trump has announced that Indonesian goods entering the US will still be subject to a reciprocal rate from the previous 32 percent to 19 percent, while goods from the US to Indonesia are not known tariffs.

DEN Chairman Luhut Binsar Pandjaitan said this success was a strong signal that Indonesia was able to secure national interests in the international negotiation forum.

In addition, Luhut emphasized that Indonesia's tariff adjustment to US products is part of a strategic policy step to strengthen the supply chain, attract added value-based investment, and strengthen Indonesia's position as a respected trading partner.

"We are not giving red carpets to outsiders, but instead opening up bigger roads for Indonesian products and business actors to compete in the global market. This is economic diplomacy with a clear long-term vision, which is based on national interests," said Luhut in an official statement, Thursday, July 17.

Luhut said Indonesia took strategic steps by simplifying tariffs on most imported products from the US, as part of a measured and beneficial reciprocal approach for both parties.

According to him, this policy is not a unilateral concession, but a strategy to open investment opportunities, encourage technology transfer, and expand access to Indonesia's export market more competitively.

He said that the DEN had carried out economic simulations with two main scenarios, namely in the first scenario, the additional tariff for Indonesian products remained high at 32 percent, as before the agreement was reached.

Meanwhile, in the second scenario, the tariff was successfully lowered to 19 percent, accompanied by adjustments to Indonesia's import rates to most products from the US.

Luhut emphasized that these two scenarios were analyzed to measure their impact on economic growth, investment, labor, and community welfare.

According to him, simulation results show that the second scenario has a much more positive economic impact, such as gross domestic product (GDP) is predicted to increase by 0.5 percent, driven by increased investment and consumption, employment grew by 1.3 percent, while public welfare increased by 0.6 percent.

Luhut added that the simulation also estimates an investment surge of up to 1.6 percent, which shows the potential for global industrial relocation to Indonesia, especially in labor-intensive sectors such as textiles, garment, footwear, furniture, and fisheries.

Indonesia is the country with the lowest additional US tariff compared to countries that have a trade surplus with the US and also among other ASEAN countries. This certainly provides a great opportunity for Indonesia. " he said.

Luhut said the reduction in tariffs opened up great opportunities for labor-intensive industries in Indonesia such as textiles and textiles, footwear, and furniture to expand market access in the United States with lower cost barriers.

According to him, in addition to encouraging exports, this policy also has the potential to attract foreign investors to relocate their industries to Indonesia, in order to take advantage of the tariff advantage in accessing the US market.

He said that the DEN also sees this agreement as an important foothold to accelerate the deregulation agenda and reduce logistics and production costs in the country (high cost economy), and not only exports are encouraged, but also national economic competitiveness as a whole.

Luhut said the DEN encourages cross-ministerial synergies to optimize this momentum for the expansion of the basis of national export actors and is committed to assisting the government in monitoring the implementation of this policy so that all its benefits are truly felt by the community and business actors.

"The DEN believes that the direction of the right and data-based national economic policy will be the key in accelerating inclusive and competitive growth in the global era," concluded Luhut.