UNAIR NEWS – In a direct response to the ongoing protectionist trade stance led by former U.S. President Donald Trump, China has officially imposed a 34 percent import tariff on select American products. According to Prof. Rossanto Dwi Handoyo, SE, MSi, PhD, an international economics expert at Universitas Airlangga’s Faculty of Economics and Business (FEB), the move is both a reactive measure and a calculated long-term strategy by Beijing.
“The U.S. has long faced a trade deficit, particularly with China. Prior to the COVID-19 pandemic, that deficit even exceeded $1 trillion. The U.S. sees this as a sign of unfair trade and has responded with steep tariffs. China’s response, however, could ultimately harm the U.S. more than help it,” he said.
Ripple effects on global trade
Prof. Handoyo highlighted that reciprocal tariff measures like these could seriously disrupt global supply chains. Since many products rely on multi-country production processes, elevated tariffs are likely to lead to sharp increases in consumer prices.
“Consider laptops—components might be manufactured in China, processors made in the U.S., and assembly done in Taiwan. If all those countries impose high tariffs on each other, the final product price could double,” he explained.
He warned that if such trade conflicts persist, global trade volumes could decline by as much as 50 percent, echoing the severe economic contraction seen during the Great Depression of the 1930s.
Foreign direct investment in jeopardy
The prolonged trade standoff could also take a significant toll on foreign direct investment (FDI), Prof. Handoyo noted. Heightened global uncertainty tends to prompt investors to adopt a cautious approach.
“Many investors will likely delay expansion plans. Even portfolio investors are moving toward safe-haven assets like gold, driving gold prices higher amid these trade tensions,” he said.
Indonesia’s strategy: Stay flexible
Looking forward, Prof. Handoyo urged Indonesia to remain adaptive and open to negotiation. He pointed out that compared to other ASEAN countries, Indonesia’s export volume remains relatively modest.
“If we retaliate with our own tariffs, it may backfire. Our products can easily be replaced by competitors. A decline in exports means lower production, job losses, and serious social implications,” he stressed.
He advised that Indonesia maintain strong trade ties with the U.S., including leveraging trade privileges under the Generalized System of Preferences (GSP) for as long as they remain in effect.
Author: Rosali Elvira Nurdiansyarani
Editor: Khefti Al Mawalia
