Government Asked to Strengthen Diplomacy to Face US Tariff Uncertainty

JAKARTA - Economist of the Center of Reform on Economics (CORE) Indonesia Yusuf Rendy Manilet encourages the government to strengthen trade diplomacy with the United States (US) government to obtain certainty on tariff policies.

"As long as the tariff determination process is still ongoing, the government needs to continue to strengthen diplomacy with the United States Trade Representative Office (USTR) and the US government to obtain certainty and expand the list of products excluded from additional tariffs," said Yusuf as quoted by ANTARA, Monday, July 27.

In addition to the diplomatic track, Yusuf assessed that the government needed to maintain the competitiveness of domestic industries through the simplification of regulations on the import of raw materials, financing support, and temporary incentives for the sectors that were most affected.

He said the labor-intensive manufacturing sector was the most vulnerable group to be affected, especially the textile, garment, footwear, and furniture industries which have a high dependence on the US market.

According to him, when orders are delayed, the company's margins can be depressed, production capacity can be reduced, and labor absorption slows down.

He also encouraged the acceleration of export market diversification to the European, Middle Eastern, and Southeast Asian regions so that dependence on the US market can be reduced.

"Strengthening compliance with international labor standards is also important because it is one of the main issues in the investigation process," he said.

Although the business world projects that the final tariff could reach around 18 percent, Yusuf assessed that Indonesia's competitiveness is not necessarily lost.

According to him, export competitiveness is not only determined by the amount of tariffs, but also production efficiency, product quality, supply chain reliability, compliance with international standards, and long-term relationships with buyers.

The United States began imposing new tariffs of 10 percent to 12.5 percent on imports from 60 trading partners starting Friday (24/7).

Indonesia is included in a group of 17 countries that are subject to additional tariffs of 10 percent by the US based on the results of the Section 301 Trade Act of 1974 investigation.

The US government stated that the policy was taken because the countries were considered not to be firm enough in prohibiting the import of goods produced using forced labor.

On the other hand, the ongoing evaluation process related to US trade policy is still ongoing and has the potential to affect the final tariff amount that Indonesian exporters must bear.

Responding to the policy, Spokesperson for the Coordinating Ministry for Economic Affairs Haryo Limanseto said the government continued to consult with the USTR so that Indonesia could obtain more competitive tariffs.

According to Haryo, Indonesia also participated actively in the investigation through the submission of written submissions, attendance at public hearings, and intergovernmental consultations.

According to him, the government has noted that the recognition of Indonesia as a country that has a commitment and regulatory framework to prevent and eradicate forced labor practices in the global supply chain.