Indonesia announces high tariffs on Chinese-made goods

A senior Indonesian official announced on Friday that the country would impose an import tariff of up to 200 percent on a range of Chinese products in a bid to protect the country’s micro, small and medium-sized enterprises (MSMEs).

Speaking to reporters, Commerce Minister Zulkifli Hasan said the trade conflict between China and the United States had prevented China from offloading its surplus production in many Western countries. This led it to redirect its exports to other markets such as Indonesia, threatening small businesses in the country with “collapse.”

“The US can impose a 200 percent tariff on imported ceramics or clothing; we can also do it to ensure that our MSMEs and industries survive and thrive,” he said, Antara news agency reported.

Reuters paraphrased Zulfikli as saying the tariffs would range from 100 to 200 percent and “could affect imports of footwear, clothing, textiles, cosmetics and ceramics.” A senior trade ministry official said Indonesia’s Trade Safeguard Committee would determine the level of the tariffs and the categories of products that would be affected.

This is not the first time Jakarta has taken steps to tighten import controls. Last year, Jakarta passed a regulation that imposed import quotas on hundreds of products, including food ingredients, footwear, electronics and chemicals. But the government was subsequently forced to revise the law several times after Indonesian companies complained that the quotas were clogging up supply chains, preventing them from getting the imported materials their domestic industries needed.

US-based observers have cited the news of these large tariffs on Chinese goods as an example of how the Global South shares the US government’s concerns about Chinese overcapacity. There are a number of key differences, however, the most obvious being that the issue has not been handled in a security-friendly manner in Indonesia to the extent that it has been in the US and other Western democratic countries. It also affects commodities.

In this case, Jakarta appears to be worried about the possible political fallout if an influx of Chinese imports pushes the country’s 64 million MSMEs to the brink of survival. The Indonesian government has a long history of intervening in the economy, through subsidies, export bans and other measures, to protect low-income Indonesians and promote the development of local industries.

As James Guild, a business columnist for The Diplomat, has pointed out, “one of the government’s top priorities is to ensure that the price of basic necessities – such as petrol, electricity, rice and cooking oil – remains stable and affordable.” It has sought to achieve this through a number of measures, including subsidies, export restrictions and a mechanism known as the domestic market obligation, under which producers of certain commodities (such as coal) must supply a certain percentage of their output to the domestic market at prices that are generally below market prices. To that end, the Ministry of Commerce last year banned e-commerce transactions on social media, dealing a blow to the regional plans of the Chinese company TikTok.

The imposition of these tariffs is therefore unlikely to disrupt the mutually beneficial bilateral relations between Beijing and Jakarta. China is currently Indonesia’s largest source of imports and its largest export market. A continued flow of trade and investment is therefore a necessary element of the Indonesian government’s national economic agenda. In this sense, it makes sense to view the new tariffs as a means of adjusting the balance between domestic and international economic priorities, rather than as an expression of bilateral tensions.

So while Beijing may not be thrilled with the move, the generally positive tenor of bilateral relations, as well as the desire to get off to a good start with the new administration of Prabowo Subianto, suggest that it is unlikely to elicit a significant response.