logo
Commentary: Will Indonesia regret its trade deal with Trump?

Commentary: Will Indonesia regret its trade deal with Trump?

CNA5 days ago
JAKARTA: Be careful what you wish for, lest it come true. That ancient proverb comes to mind when considering the eagerness of America's trade partners around the world to negotiate deals with United States President Donald Trump's administration. Four countries already have, with Indonesia the latest to do so – and possibly the first to regret it.
The United States has announced a complex, tiered tariff regime, including a 25 per cent tariff on labour-intensive goods such as textiles and footwear, a 40 per cent tariff on goods suspected of being 'trans-shipped' or having content of Chinese origin, and a 50 per cent tariff on so-called 'strategic sectors', including aluminum, copper, semiconductors and pharmaceuticals.
An additional 10 per cent levy applies to exports from BRICS countries (including Indonesia). Countries might also face anti-dumping duties, which are often steep, politically driven and inconsistently applied.
While these measures hurt US importers and consumers the most, they also significantly heighten uncertainty for exporters. By guaranteeing that Indonesia will not face tariffs exceeding 19 per cent on its exports to the US through 2029, its new agreement with the US seems to mitigate this uncertainty, providing a level of protection against Trump's tariff escalations.
Indonesia can now rest assured that it will not face the kinds of extreme tariffs to which China has been subjected.
A DEAL THAT REDUCES LOSSES WITHOUT DELIVERING GAINS
Indonesia's government argues that such a deal was essential, because even though the US accounts for only 9.9 per cent of Indonesia's total exports, the trade relationship is disproportionately important. Indonesian exports to the US – including apparel, footwear, furniture, rubber products and integrated circuits – are labour-intensive, they note, and thus support a substantial number of jobs.
But these sectors may remain vulnerable to higher tariffs. As it stands, it is not clear whether the 19 per cent cap applies to all Indonesian exports, or if some products – particularly those containing Chinese inputs – could still be subject to steeper duties. In any case, 19 per cent tariffs are very burdensome, and Indonesia has also agreed to impose no tariffs on US goods. At best, the deal reduces losses; it does not deliver gains.
Moreover, to secure this dubious victory, Indonesia reportedly agreed to purchase 50 Boeing aircraft and commit to importing US$15 billion worth of US energy products (nearly 40 per cent of Indonesia's total energy imports) and US$4.5 billion worth of American agricultural products.
But many important questions remain unanswered. How will these purchases be financed, and on what terms? What are the specifications, unit costs and delivery timelines? Who will oversee procurement, and how will transparency be ensured?
Most important, if these exchanges are merely political gestures, they could turn out to be economically damaging.
The use of jets from Boeing, which has faced a string of quality and safety scandals in recent years, could create considerable risks for Indonesia's airlines. And imports of US agricultural goods risk undercutting local farmers and breaching commitments to the Association of Southeast Asian Nations (ASEAN), as well as other trade agreements.
IMPACT ON INDONESIA'S TRADE RELATIONS
The deal might affect Indonesia's trade relationships in other ways. Indonesia has concluded comprehensive trade agreements with several major partners, including Australia, China, India, Japan, New Zealand and South Korea. It is close to finalising one with the European Union, and it recently launched negotiations with the United Arab Emirates.
If US firms are granted preferential treatment and zero-tariff market access, these partners might question Indonesia's commitment to fair competition – or demand comparable terms.
Beyond trade, the agreement risks eroding Indonesia's carefully maintained strategic neutrality. Indonesia has long sought to balance its relationships with the US and China, but this deal could be seen as a lurch toward the US, exposing the country to escalating pressure to choose a side.
As Indonesia becomes increasingly politically entangled with one giant – with far-reaching economic and strategic consequences – it is at risk of becoming economically dependent on the other.
Over the past decade, Indonesia's trade with China has more than doubled, reflecting deepening economic ties. While Indonesia exports mostly commodities and processed metals to China – especially nickel, iron and steel, mineral fuels and vegetable oils – it imports high-value machinery, electrical equipment, vehicles and plastics from the country.
In the face of challenging trade relations with the world's two mightiest powers, Indonesia's government deserves credit for seeking trade assurances. But the deal that it secured with the US lacks clarity, transparency, mutuality, and strategic vision.
As a result, it may turn out to be largely symbolic, bringing only a slight reduction in short-term costs. In the long term, it might prove economically and even geopolitically damaging.
AVOIDING DEPENDENCE ON A SINGLE PARTNER
Three urgent steps can help prevent this outcome. First, Indonesia's government must demand full clarity from the US on the 19 per cent tariff cap: Are all its exports shielded from Trump's sector-specific classifications, or is the real cost of the deal hidden in the fine print?
Second, the authorities should publish the full details of their procurement commitments, particularly the purchase of Boeing aircraft and US agricultural and energy products, so that these commitments' financial implications and strategic value can be assessed.
Finally, Indonesia must reaffirm a long-term trade strategy anchored in diversification, rules-based agreements, and regional leadership. Above all, it needs a strategy that avoids excessive dependence on any single partner and preserves its autonomy in an increasingly polarised global economy.
Only then can Indonesia ensure that a handshake in Washington does not become a handcuff at home.
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

US commerce secretary says Trump really likes TikTok, but app has to move to US ownership
US commerce secretary says Trump really likes TikTok, but app has to move to US ownership

CNA

time3 hours ago

  • CNA

US commerce secretary says Trump really likes TikTok, but app has to move to US ownership

WASHINGTON :U.S. President Donald Trump likes TikTok but the Chinese-owned short video app, used by some 170 million Americans, has to move to U.S. ownership, Secretary of Commerce Howard Lutnick said on Sunday. "The President really likes TikTok, and he said it over and over again, because, you know, it was a good way to communicate with young people," Lutnick said in an interview on Fox News Sunday with Shannon Bream. "But let's face it, you can't have the Chinese have an app on 100 million American phones, that is just not okay. So, it's got to move to American ownership, it's got to move to American technology, American algorithms," he said. "I know the President is positive towards TikTok, if it can move into American hands."

US Fed poised to hold off on rate cuts, defying Trump pressure
US Fed poised to hold off on rate cuts, defying Trump pressure

CNA

time4 hours ago

  • CNA

US Fed poised to hold off on rate cuts, defying Trump pressure

WASHINGTON: The US central bank is widely expected to hold off slashing interest rates again at its upcoming meeting, as officials gather under the cloud of an intensifying pressure campaign by President Donald Trump. Policymakers at the independent Federal Reserve have kept the benchmark lending rate steady since the start of the year as they monitor how Trump's sweeping tariffs are impacting the world's biggest economy. With Trump's on-again, off-again tariff approach - and the levies' lagged effects on inflation - Fed officials want to see economic data from this summer to gauge how prices are being affected. When mulling changes to interest rates, the central bank - which meets on Tuesday and Wednesday - seeks a balance between reining in inflation and the health of the jobs market. But the bank's data-dependent approach has enraged the Republican president, who has repeatedly criticised Fed Chair Jerome Powell for not slashing rates further, calling him a "numbskull" and "moron". Most recently, Trump signalled he could use the Fed's US$2.5 billion renovation project as an avenue to oust Powell, before backing off and saying that would be unlikely. Trump visited the Fed construction site on Thursday, making a tense appearance with Powell in which the Fed chair disputed Trump's characterisation of the total cost of the refurbishment in front of the cameras. But economists expect the Fed to look past the political pressure at its policy meeting. "We're just now beginning to see the evidence of tariffs' impact on inflation," said Ryan Sweet, chief US economist at Oxford Economics. "We're going to see it (too) in July and August, and we think that's going to give the Fed reason to remain on the sidelines," he told AFP. "TRIAL BALLOON" Since returning to the presidency in January, Trump has imposed a 10 per cent tariff on goods from almost all countries, as well as steeper rates on steel, aluminium and autos. The effect on inflation has so far been limited, prompting the US leader to use this as grounds for calling for interest rates to be lowered by three percentage points. Currently, the benchmark lending rate stands at a range between 4.25 per cent and 4.50 per cent. Trump also argues that lower rates would save the government money on interest payments, and floated the idea of firing Powell. The comments roiled financial markets. "Powell can see that the administration floated this trial balloon" of ousting him before walking it back on the market's reaction, Sweet said. "It showed that markets value an independent central bank," the Oxford Economics analyst added, anticipating Powell will be instead more influenced by labour market concerns. Powell's term as Fed chair ends in May 2026. JOBS MARKET "FISSURES" Analysts expect to see a couple of members break ranks if the Fed's rate-setting committee decides for a fifth straight meeting to keep interest rates unchanged. Sweet cautioned that some observers may spin dissents as pushback on Powell but argued this is not necessarily the case. "It's not out-of-line or unusual to see, at times when there's a high degree of uncertainty, or maybe a turning point in policy, that you get one or two people dissenting," said Nationwide chief economist Kathy Bostjancic. Fed Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman have both signalled openness to rate cuts as early as July, meaning their disagreement with a decision to hold rates steady would not surprise markets. Bostjancic said that too many dissents could be "eyebrow-raising", and lead some to question if Powell is losing control of the board, but added: "I don't anticipate that to be the case." For Sweet, "the big wild card is the labour market". There has been weakness in the private sector, while the hiring rate has been below average and the number of permanent job losers is rising. "There are some fissures in the labour market, but they haven't turned into fault lines yet," Sweet said. If the labour market suddenly weakened, he said he would expect the Fed to start cutting interest rates sooner.

Remote work for Singaporean elders: How a 58 y/o man in SG secured his financial lifeline and retirement needs with just a laptop and Wi-Fi
Remote work for Singaporean elders: How a 58 y/o man in SG secured his financial lifeline and retirement needs with just a laptop and Wi-Fi

Independent Singapore

time4 hours ago

  • Independent Singapore

Remote work for Singaporean elders: How a 58 y/o man in SG secured his financial lifeline and retirement needs with just a laptop and Wi-Fi

SINGAPORE: When Lim Wei Ming sat at his Tanjong Pagar office one March morning, staring at his CPF retirement projections, he didn't see it as his golden years. Instead, he saw it as a financial black hole. Wei Ming saw his decades of dutiful saving and climbing the corporate ladder led to one cold, hard truth: even with the maximum Central Provident Fund (CPF) contributions, retirement in Singapore might be more sobering than celebratory. His calculations resulted in a modest S$2,800 monthly payout from CPF, compared to a real-world expense of nearly S$8,000, Maxthon quoted him as saying. Mortgage, mum's medical bills, daughter's overseas uni fees —all of that wasn't fiction. This is Singapore's retirement reality. But Lim, like hundreds of Singaporean seniors, discovered a game-changer: remote work. The remote work revelation What started as a pandemic necessity has evolved into a permanent, powerful solution, especially for older professionals. Remote work isn't just a lifestyle shift; it's a financial lifeline. For Singapore's pre-retirees and seniors, it's becoming the difference between scaling back or soaring ahead. The traditional model—work till 62, retire on CPF—is buckling under pressure. Today's retirees are living longer, facing higher costs, and often supporting both parents and adult children. It's the 'sandwich generation' crunch, Singapore edition. With CPF's Enhanced Retirement Sum now at S$426,000 and contribution rates increasing slightly for those aged 55–65, some progress has been made. But for many, it's still not enough to fund a 20-30-year retirement. That's where remote work comes in, with a dazzling array of benefits. Why remote work makes dollars and sense 🏦 1. Boosting CPF while you Zoom A 60-year-old who brings in S$4,000 a month remotely for five more years could add over S$50,000 to their CPF account. That's not pocket change—it could mean hundreds more per month in CPF LIFE payouts down the road. Add in compound interest at 4% (Special Account) and 2.5% (Ordinary Account), and remote work becomes an interest-generating engine. 🏘 2. Escape the CBD, embrace the world No office, no problem. Retirees are ditching the daily commute and expensive city rents for cosier, cheaper locales—some even across the Causeway. Whether it's a beachfront flat in Penang or a mountain view in Chiang Mai, they're stretching their dollars without sacrificing productivity. Even staying local, the savings add up—S$200 to S$400 a month in transport alone. That's before you count hawker lunches swapped for home-cooked meals and a farewell to overpriced work attire. 🧾 3. Sweetening the tax deal Singapore's territorial tax system means income earned abroad but not brought into the country is not taxable. Couple that with no capital gains tax and the ability to time when income is declared, and it becomes a tax playground for the financially savvy silver fox. 🏥 4. Keeping healthcare costs in check Working remotely means fewer MRT rides and fewer chances to catch something in a crowded lift. Add to that continued employer healthcare contributions and less pressure to tap into Medisave, and you've got a healthier, wealthier retirement runway. Flexible work law: The wind in their sails Since December 2024, Singapore employers are now required to formally consider flexible work requests, including remote options. Already, 76% of companies have hybrid policies in place. For older workers, this isn't just about convenience—it's empowerment. What jobs can you do? More than you think Sectors ripe for remote elder-preneurship include: Finance: Advisory, consulting, compliance—Singapore's financial brain trust is still in hot demand Advisory, consulting, compliance—Singapore's financial brain trust is still in hot demand Tech: With fintech booming, part-time remote gigs abound With fintech booming, part-time remote gigs abound Education: Corporate training, language classes, mentoring roles Corporate training, language classes, mentoring roles Legal & Compliance: Regulation never sleeps Regulation never sleeps Marketing & Communications: Content creation doesn't care about your age—just your storytelling chops Singapore's English-speaking edge and reliable digital infrastructure make it a regional powerhouse for remote expertise. You've got the knowledge. You've got the tools. You've even got the timezone. Why stop now? The game plan for retirement 2.0 Phase 1 (Ages 50–55): Prep Mode Upskill in digital tools (Zoom, Canva, Google Workspace, etc.) Build your LinkedIn game Learn the ropes of freelancing, consultancy, or digital entrepreneurship Phase 2 (55–65): Transition Mode Negotiate hybrid work options Start building your client base Use remote work income to top up CPF and Medisave accounts Phase 3 (65+): Flex and Thrive Work part-time, stress-free Mix CPF LIFE payouts with flexible gigs Keep the brain engaged and the wallet happy What could you earn? In one conservative case study: A pre-retiree earns S$2,500/month remotely Lives 20% cheaper thanks to a remote lifestyle Adds S$60,000 to CPF over 8 years Saves S$96,000 on living costs Total benefit is a cool S$156,000 In an optimistic scenario? Earn S$4,000/month consulting from across the border Slash living costs by 40% Build up S$280,000 in eight years That's not retirement. That's reinvention. From survival to strategy This isn't just theory. Singaporeans like Wei Ming and his colleague Sarah—both in their 50s—have turned this model into reality. They've swapped stress for strategy, and their daily commutes for consulting gigs. By leveraging Singapore's global brand and regulatory know-how, they now earn more, save more, and live more. From Singapore to Kuala Lumpur or Penang, or even Bali or Krabi, a growing community of Singaporean 'remote retirees' is proving that you don't have to retire from work—you just need to rethink or reinvent how and where you work. The world is your office Let's be clear: remote work isn't a luxury anymore—it's a necessity. It's the CPF booster, the health preserver, the tax hack, and the lifestyle upgrade wrapped into one. And in the face of a demographic tsunami, rising costs, and longer lifespans, it might just be the only lifeboat that floats. So if you're staring at your CPF projections with dread—or just sick of the daily jam on the PIE—take a page from Wei Ming's playbook. The world is your office, and your legacy doesn't have to come with a retirement countdown clock. All you need is Wi-Fi, expertise, and the will to hit 'Join Meeting.' In other news, which may also be of interest to senior citizens to give it a shot for your financial lifeline and retirement needs planning, a Singaporean couple has transformed their home into a multi-stream income engine, generating over S$3,000 to S$5,000 a month through practical, proven side hustles that are perfect for 2025. In a video that has been making waves among aspiring entrepreneurs, Darien (the hubby) breaks down 10 legitimate side hustles that Singaporeans can start right now. Some require skills, others need hustle, but all are achievable. Photo: YT screengrab/@darienandjoanna You can read more about them and find out how you too could turn your home into a money-making machine while you bake sourdough, play with dogs, or teach a workshop — all without stepping out of your front door over here: 'We make S$5000/month!' — Singaporean couple turns their S$1M condo into a passive income machine with 10 side hustle recommendations, working from home

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store