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Opinion | US-China trade war: Vietnam might get Apple, but Indonesia can get a bite of the action, too
- Countries like Vietnam stand to benefit as companies like Apple leave China for more profitable markets
- But for Indonesia to benefit, some innovative, outward-looking policy decisions will be needed
Reading Time:3 minutes
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Uncertainty drives dramatic shifts in the global economy, and investors and economists certainly cannot predict with any certainty what the US-China trade war may mean for the rest of the us. But it is precisely this unknown that will decide the winners and losers of the battle for economic supremacy, and Indonesia should take advantage.
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Trade wars start when a country adopts a protectionist approach, imposing import tariffs to protect domestic industries and open jobs. Such a move generally encourages local producer prices to drop, making them more competitive against import markets. But it also slows growth in those countries involved, and globally, it can lead to inefficiency in the allocation of resources.
Reducing the US’ trade deficit to stoke domestic production is what motivated US President Donald Trump’s decision to adopt a protectionist approach – increasing tariffs on steel and aluminium imports and on automotives from Europe, as well as goods from China.
Trump has so far slapped 25 per cent on a number of imported Chinese goods, amounting to about US$300 billion. China, for its part, has applied new tariffs on US imports worth US$60 billion.
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The immediate consequences have been Chinese imports in the US falling 8.5 per cent in May 2019, compared to the same period last year. In China, exports – especially to the US – are predicted to record similar declines. Some companies with production lines in China, such as Apple, are expected to leave the country in search of more profitable markets, such as Vietnam. And global growth is now expected to weaken by about 0.5 per cent by 2020 to 2.6 per cent – the weakest since the 2008 global financial crisis.
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