TARIFFS: AMERICANS TELL INDONS 'TAKE A HIKE'. BRADER ZAFRUL 'TAKE A NOTE'.

 

• Indon high-level meetings with US this week in Washington 
• to seek relief from steep tariff hikes imposed by Donald Trump
• talks concluded without a formal agreement
• Minister Airlangga Hartarto said further negotiations next two months
• Indons met US Secretary of Trade Howard Lutnick 
• Tariffs Could Reach 37 Percent
• Airlangga said actual ceiling could be higher
• maximum tariffs can be 10+10 or 10+37
• These tariffs will certainly increase costs of exports to US
• Labor-Intensive Sectors Hit Hardest
• Indonesia seeking fairer treatment for footwear, textiles, furniture, shrimp. 
• These products could lose competitiveness in the US market.
• Electronics and Minerals May See Exemptions
• Certain electronics -- mobile phones, semiconductors -- exempted 
• request similar treatment to other electronic goods, home appliances.
• Trade Concessions Offered
• Indonesia proposed trade concessions in exchange for tariff relief
• include increasing imports of LPG, gasoline, soybeans, capital goods from US
• also adjust regulations, business licensing, import procedures for US goods
• Washington called on Indon to ease local content requirements

My Comments: 

I hope our MITI Minister Tengku Zafrul Ha Ha Ha will take some notes.  The Americans have basically told the Indonesians to take a hike. The Indons say they will meet the Americans again in two months. Somehow I dont think that is going to happen. I think the Americans have already given the Indons a full dossier of what they want the Indonesians to cut. 

Not only the tariff rate (against the import of American goods into Indonesia - note the Indons did not say what is THEIR tariff on American imports) but more importantly those irritating NON-TARIFF BARRIERS like regulations, licensing, local content regulations, import procedures etc all of which are designed to make it more difficult to import American goods into Indonesia.

THE AMERICANS MOST LIKELY WANT ALL THOSE NON TARIFF BARRIERS TO BE ABOLISHED. 

I dont think the Americans are going to meet the Indonesians again in two months for another round of negotiations about negotiations. Or discussions about discussions. 

Brader Zafrul Ha Ha Ha should take careful notes because Malaysia is the world champion in tariff plus NON TARIFF BARRIERS against imported products. APs, quotas, licenses, monopolies, oligopolies are all used to make life difficult for Malaysian consumers. 

So if Zafrul goes to Washington with nothing better to offer the Americans (compared to the Indonesians) then be prepared to 'TAKE A HIKE' as well.

Indonesia has offered to "buy more American exports" -  increasing imports of LPG, gasoline, soybeans, capital goods.  Meaning the import tariffs against American goods remain. I dont think that is what the Americans want. Brader Zafrul take note. 

The Americans are also going to play off one country against another, especially the ASEAN countries. Lets say Vietnam drops some tariffs and trade barriers against the import of American products, then the Americans will use that against the Indons. And vice versa. If Indonesia drops some of their NON TARIFF barriers then the Americans will use that against Malaysia. And on and on.

But I think the biggest bargaining chip the Americans possess right now is they can simply walk away from making a deal. TAKE A HIKE is a real option. This is what has happened to the Indonesians. The Indons hoping for  "further negotiations next two months"  sounds like bullshit. It ain't gonna happen. Brader Zafrul take note.

To overcome the American tariffs, Indonesia also wants to find new export markets. Really? Export washing machines to China? You must be joking. Or sell the washing machines to Myanmar and Bangladesh? They got no money.

The whole world is addicted to the American market. If you cannot sell to the US market, your goose can get cooked.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.