‘Unfair for US to turn protectionist and ask others to open up': Indonesian economist on Trump tariffs

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2 days ago

In an exclusive conversation with Firstpost, renowned Indian economist Dr Hendri Saparini emphasised that with Trump tariffs and military conflicts gripping the world, the importance of global-level cooperation has declined, opening space for fostering strong regional and bilateral relationships read more
With Trump tariffs and two ongoing wars — in Gaza and Ukraine — gripping the world, the importance of 'global-level cooperation' has declined, opening space for fostering 'strong regional and bilateral relationships,' said prominent Indonesian economist Dr Hendri Saparini. In an exclusive conversation with Firstpost's Bhagyasree Sengupta, Dr Saparini said the world is facing several challenges with the global order undergoing sudden changes.
Dr Saparini, a renowned economist and founder of Core Indonesia (Centre of Reform on Economics), said it is 'unfair' for the Trump administer of the US to turn 'protectionist' in its economic policies while pressuring other countries to open their markets for American companies.
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She also said while Indonesia might not have much direct impact of the reciprocal tariffs announced by US President Donald Trump like some of the other Asian countries such as Vietnam, the move is resetting the global trade order.
In her interview with Firstpost, Saparini also highlighted the untapped potential of India-Indonesian ties and also emphasised how Jakarta manages its trading relations with China despite a decade-long territorial dispute.
When asked about whether the Trump tariffs compel Indonesia to scrap some of its protectionist policies, Dr Saparini argued that Indonesia has remained open in terms of global trade and pointed out how Washington DC is more protectionist in comparison to Jakarta.
Prominent Indonesian economy Dr Hendri Saparini sits down with Firstpost to discuss different aspects of Indonesian economy. Image Source: Embassy of the Republic of Indonesia (New Delhi)
'The United States' claim about Indonesian trade policy is indeed more protective, and it is not easy to do business. I don't agree with the assertion because Indonesia is facing a surplus in goods trade. But when we talk about service trade, we are in a deficit,' she explained.
'The Indonesian tariff for US products is lower if you compare it with other Asean countries or Latin America. Then, about the non-tariff measures that they call protections, the US implemented more than 600 protectionist policies when it came to trading with other nations. But Indonesia only has 300 such measures. So, it's unfair if we say that Indonesia should open this and release this policy because they don't want Indonesia to be a protectionist country.'
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'What we need to do as the Indonesian government is that President Prabowo Subianto should be more careful about this. Because if we just open the trade the import, and then also release all the regulations, what will happen to the Indonesian economy? We need to develop the economic sector, especially in industrialisation. So, we still need to be careful with this trade policy, and then the industrial policy, and also fiscal policy,' she said.
Following is the edited excerpt of the full conversation:
India-Indonesia Ties
Q. How do you assess India-Indonesia economic relations, especially after the recent record bilateral trade figures and the implementation of the Local Currency Settlement System between the two countries?
Dr Saparini: If we talk about LCSS (Local Currency Settlement System) between India and Indonesia it's going to be a good opportunity like what we already have with other countries. Given the strong relationship between India and Indonesia, we will use LCSS more in business and not in tourism.
Another benefit is we can strengthen and stabilise the currency for both of us, given the uncertain global situation. So corporations in terms of payment systems and currency are important for us.
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Q. What new opportunities do you see for deepening cooperation in trade, investment, and tourism as both countries celebrate the Asean-India Year of Tourism in 2025?
Dr Saparini: If we talk about the relationship between India and Asean, for example, in terms of tourism, Indonesia is not the priority destination for Indian tourists, most people visit other Asean countries. So, I think we need to work together. I mean, Indonesia also has to do something to improve the development of the tourism sector.
One thing we need to do more is plan strategies to boost religious tourism. Indonesia has the potential on that. Indonesia is not only about the scenery, but t also about the religion. We have a lot of places that we can develop because, in Indian tourism, I think mostly domestic is religious tourism. I think this is a good opportunity for both of us.
Q. What are the main challenges facing India-Indonesia economic collaboration, and how can both governments and private sectors address them?
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Dr Saparini: I think we are facing the same problems, Indonesia and India have institutional challenges. There is corruption then bureaucracy can sometimes not be efficient and many other issues that affect business. So then what should we do? We should have deep and focused discussions between the government, and businessmen in both countries.
Then we see one by one, how to reduce these issues of corruption and uncertainties in policies and in n which sector and what kind of policy would work.
Trump Tariffs
Q. Indonesia is on the verge of facing the brunt of the Trump tariffs, the country's finance minister said that Indonesia's growth rate can be cut by half a percentage point if the Trump tariffs are implemented. How do you think the Tariffs would impact the Indonesian economy?
Dr Saparini: When we talk about the Trump tariff, the impact on Indonesia is not as high as the impact on Malaysia, Vietnam, or other countries, because the share of export for Vietnam maybe 80 per cent of the GDP [gross domestic product] but in Indonesia, it is only 30 per cent share to the GDP. If we focus more on trade between Indonesia and the United States, it's only 2 per cent of the GDP. So, when it comes to trade the impact is not that big.
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But the Trump tariff could also impact monetary aspects, currency and interest rates. So, I agree that the economic growth will be slowed down. But in my opinion, even before Trump's tariff policy, Indonesia had a slowdown in economic growth this year.
The projected growth this year is only 4.8 per cent to 5 per cent. Before the government targeted 5.3 per cent. For us, this is difficult, because we have also another problem in domestic.
On China
Q. Recently, the Chinese premier met the Indonesian President for trade talks amid Trump tariffs. Could you tell us about the outcome of the visit, and is Indonesia looking at China as an alternative to the US?
Dr Saparini: Indonesia has a partnership with the United States and Indonesia has a partnership with China. We have different characteristics in partnership, and also different areas in economic cooperation. So I don't think we need to replace the United States with China. We need a new strategy for both to increase and have a better partnership with both countries.
If we look at the result of the meeting between Indonesia and China. I think most of the discussion is not just economy, because we already have a huge economic partnership. So they talk about the military, they talk about social security and other areas.
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In terms of the economy, they are discussing how to make a deeper relationship. We already have good partnerships, and investment as well. But Indonesia, President Prabowo, tried to open with other sectors. We need a good relationship with the United States in the technology and financial sector. We are focused on trading investments with China.
Q. China remains Jakarta's biggest trading partner. However, Indonesia has its share of territorial disputes with Beijing. How does a country navigate in such a situation?
Dr Saparini: This [Territorial disputes] is not an easy issue. But it's not a current issue, it has been existing for a long time. I think, President Prabowo has a different strategy in the international relationship, cooperation, and also widening the cooperation, not only in economics, but also in other sectors.
I hope the Indonesian government and also in China, create a new partnership that will benefit the economies of both countries. We talk about security, we talk about conflict, and the goal, the most important one should be to give a boost to the economies of both nations.
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Q. In your opinion, how should regional economies like Indonesia and India respond to China's 'Blue Dragon' strategy and its implications for maritime security and trade?
Dr Saparini: Every country will have their strategy, and also its own goal for the relationship. This [China's Blue Dragon] is the new strategy. And of course, this is unstoppable, like what Russia is doing in the geopolitical arena and also in the United States. China will do the same.
What we need to do is sit together. We need to assess the negative impact but also see the opportunity we can witness by collaborating.
Prominent Indonesian economy Dr Hendri Saparini sits down with Firstpost to discuss different aspects of Indonesian economy. Image Source: Embassy of the Republic of Indonesia (New Delhi)
Trilateral ties between India, Indonesia and Australia
Q. With Australia recently unveiling a new roadmap to deepen economic ties with India, how do you see the trilateral relationship evolving between India, Indonesia, and Australia?
Dr Saparini: The importance of global-level cooperation has declined, opening space for fostering strong regional and bilateral relationships. In my opinion, this trend is good because we can be more focused on issues. Just like the United States, Indonesia has long-term collaborations and partnerships with Australia, India and China in different areas.
We tend to be more competitive than complementary. If three countries [India, Indonesia and Australia] work together, it will be complementary partnership. The three nations can cooperate in sectors like human resources, and technology, and then develop new strategies. The cooperation between the three countries will be beneficial.
On Indonesian economy
Q. Indonesia is facing its share of economic challenges. We saw the economic figures of the first quarter have been the weakest since 2021, consumer confidence has dipped since December and there have been fears that the Indonesian govt is overspending on welfare initiatives and some of them can even bust the budget deficit cap of 3 per cent, what is your assessment regarding the current economic situation in the country.
Dr Saparini: We predicted that Indonesia will see a decline in economic growth not only in the economy but also in terms of policy response to the situation. The characteristic of the Indonesian economy is traditional. Our economy is based on domestic consumption. If we integrate between household consumption and government consumption, it's around 75 per cent. Consumption among middle-class households has declined to a share of 56 per cent, so the economy is also witnessing a decline.
Now the government tries to allocate more budget to help the consumption of the household. For example, giving money to people whose wages are at a certain level. It is just a short-term solution. In the long run, we need to create more jobs.
Why middle-class consumption is declining because they are e facing layoffs. There is no competitiveness in industry because of industrial policy, because of the trade policy and also because of the technology. Indonesian industry tends to use robots reducing human labour.
The old problems need a solution. It is not just like a prescription for the headache or for the stomach. We need to work on the core of the Indonesia problem. The real problem is unemployment. Twenty per cent of the total population is facing unemployment.
Q. Given your background in macroeconomics and poverty reduction, how do you see regional economic integration impacting poverty and inequality in Southeast Asia?
Dr Saparini: The partnership and collaboration between nations should be beneficial. If we work together, countries will benefit more than they do by themselves. We should talk about energy to reduce carbon emissions. If the developed countries said the solution is going electric.
Let's change the energy source from fossils to cleaner options to produce electricity. But then we need nickel to develop the battery. Then they invest in Indonesia, especially east Indonesia. In some circumstances we have a good partnership, and relationships in economics and investment but why is it hurting the people? So, it means the design of the policy should be changed.
Q. What are your thoughts on the future of Asean's centrality in regional security and economic frameworks, especially as external pressures mount?
Dr Saparini: For Asean, I'm quite optimistic about the future. Maybe 20-30 years ago, most of us [Asean countries] were like competitors to each other because of the economic characteristics. But now we have different characteristics between Asean countries. So it should be more complementary between Asean countries. We have a market and we still have natural resources. Collaboration between Asean countries will be better for the future.
Now Asean also has partnerships with developed countries it is not just limited to Asean countries. Asean has ties with India, and Japan so then we should seek more opportunities to work together. We have a good partnership with Asean countries. Like in Thailand right now, it's facing an ageing population. They need the labour from Indonesia. But we have to work on providing that labour.