Mitigating Trade Wars, Protecting Domestic Products

Amid the downward trend in prices of leading export commodities, Indonesia's trade sector faces a number of major challenges. These include the trade war triggered by the United States, the onslaught of imported products, and the increase in a number of food prices, especially Minyakita.

Under Donald Trump's leadership, the US has raised import tariffs on a number of products from China, Canada, and Mexico. Although it has not targeted Indonesia, the government still needs to mitigate the indirect impacts of the trade war.

One of them is the potential for import flooding, especially from China, which is Indonesia's main trading partner. Imports of textiles and textile products (TPT) from that country are one of the causes of many national TPT industries collapsing.

On the other hand, the price of Minyakita which has soared far above the highest retail price (HET) has not decreased. In fact, the price movement of simple packaged cooking oil under the People's Cooking Oil program has occurred since June 2024 or the last nine months.

Minister of Trade Budi Santoso responded to a number of challenges in the trade sector during a visit to the Kompas Daily, Thursday (6/3/2025).

What are the challenges facing Indonesia's international trade today?

Several world institutions estimate that global economic growth in 2025 will be stable, namely 2.7-3.3 percent. However, the growth is still slowing down as monetary policy tightening continues and disruption due to geopolitical tensions.

From the trade side, the World Trade Organization (WTO) predicts a recovery in the growth of trade in goods from 2.7 percent in 2024 to 3 percent in 2025. Indonesia's export performance has indeed started to slow down along with the decline in global commodity prices.

However, Indonesia's trade balance still recorded a surplus for 57 consecutive months from May 2020 to January 2025. Throughout 2024, for example, Indonesia's trade balance surplus was US$31.04 billion. Indonesia's largest trade surpluses were with India and the US, which were US$14.67 billion and US$14.34 billion, respectively.

These two countries will be the biggest challenges to Indonesia's trade performance. The US has raised import tariffs on products from China, Canada, and Mexico. India has protected trade and raised import tariffs on a number of commodities several times for domestic interests.

The Ministry of Trade (Kemendag) targets exports in 2025 to grow 7.1 percent annually to Rp294.45 billion US dollars. The target is quite tough considering that Indonesia's exports in 2024 only grew 2.29 percent annually.

How to mitigate these challenges, including efforts to improve export performance?

First, trade diplomacy with the US and India needs to be strengthened, namely by providing trade access to each other. In order to keep our main export market access open, we also need to provide market access to both countries.

We will not adopt the path of protectionism because it can backfire on Indonesia's export performance. As much as possible, we will not prevent the products of the two countries from entering the Indonesian market. However, we will still measure the products that will enter according to domestic needs.

With India, for example. Indonesia has imported frozen buffalo meat from that country. Indonesia has also asked India to develop garlic like China. The goal is to substitute garlic imports which have so far been 100 percent from China.

We will not adopt a protectionist path because it could backfire on Indonesia's export performance.

Second, we are trying to strengthen non-traditional export markets. We are targeting a number of countries in the Middle East, Africa, Latin America, and South Asia. However, in particular, we want to increase cooperation with the European Union through the Indonesia-European Union Comprehensive Economic Partnership (I-EU CEPA).

In the negotiation of the agreement, the European Union (EU) is willing to provide access to a number of Indonesian agricultural products, footwear, and TPT. The EU will even provide the same tariff as the tariff imposed on Vietnam. This could be an opportunity to expand the export market for Indonesian products while mitigating if at any time the US raises tariffs on Indonesian products.

Third, we facilitate micro, small, and medium enterprises (MSMEs) that are ready to export to promote their products to a number of buyers from other countries. One way is to ask trade attaches and the Indonesian Trade Promotion Center in 33 countries to hold business explorations.

In January-February 2025, they have held 146 business exploration sessions involving 498 MSMEs and 50 prospective buyers from various countries. The total transaction we got was worth 8.77 million US dollars.

This effort is also one of our flagship programs, namely UMKM Dare to Innovate, Ready to Adapt (BISA) Export. Through this program, we will optimize the role of Indonesian trade representatives in various countries to promote export-ready UMKM products with a transaction target of 55 million US dollars, both through exhibitions and business exploration.

Also in order to increase exports, our other effort is to hold the Trade Expo Indonesia (TEI) 2025. The 40th international trade exhibition will be held at the Indonesia Convention Exhibition (ICE), Bumi Serpong Damai, Tangerang, Banten, on 15-19 October 2025. The total transaction is targeted to reach 16.5 billion US dollars.

Then, what are the efforts of the Ministry of Trade to mitigate the potential for a “flood” of imports due to the impact of the US-China trade war?

One of our programs is Domestic Market Security. One of the efforts made is to impose anti-dumping duties (BMAD) on nylon products from China, Thailand, and Taiwan, as well as safeguard duties (BMTP) on ready-made clothing. We have even applied BMTP to imported yarn, curtains, fabrics, and carpets.

We also continue to monitor and take action against the circulation of illegal imported goods, including TPT and used clothing. The supervision is carried out by the Specific Goods Supervision Desk for which Import Trade Regulations are Enforced under the Directorate General of Consumer Protection and Trade Order.

The types of goods monitored include TPT, ready-made clothing, clothing accessories, ceramics, electronics, footwear, and cosmetics. The supervision and enforcement also involve related ministries/institutions, the Attorney General's Office, the National Police, customs and excise, the Indonesian Navy, regional trade services, and the State Intelligence Agency.

In February 2025, for example, we managed to secure imported textile products that were suspected of being illegal. The textile products were new clothes, used clothes, and imported rolls of cloth totaling 1,663 balpres packages with a value of Rp8.3 billion.

In addition, in making import regulations, we also always involve ministries/institutions and related business associations. Likewise, when issuing import permits, we also consider the commodity balance and a number of inputs from related stakeholders.

In the domestic trade sector, what are the efforts of the Ministry of Trade to overcome the spike in food prices, especially Minyakita?

Minyakita's price has long been above the HET of IDR 15,700 per liter. As of March 5, 2025, the national average price of Minyakita is IDR 17,200 per liter. In terms of supply and stock, it is actually safe. This is because we have asked cooking oil producers to supply cooking oil needs, including Minyakita, to Bulog and ID Food and to traditional markets.

We prohibit them from selling Minyakita in a bundle (a package with other products). We have also asked their distribution network to sell Minyakita at the selling price set by the Ministry of Trade.

The selling price of Minyakita from producers to first line distributors (D1) is set at IDR 13,500 per liter, D1 to D2 IDR 14,000 per liter, D2 to retailers IDR 14,500 per liter, and retailers to consumers according to the HET IDR 15,700 per liter.

So, what makes Minyakita's price higher than HET is not limited supply, but rather a problem at the distribution level. One of them, we found that there were several naughty D2s that applied a minimum purchase quota for Minyakita to retailers in large quantities.

Retailers, for example, are required to buy Minyakita in 50 or 100 boxes. With that limitation, only retailers with large capital can afford it.

Currently, we are monitoring the rogue distributors. Some of them we have taken firm action.

Finally, the big retailers resell to the small retailers at a higher price. The distribution chain that should only have D1 and D2, now has D3 and D4. Currently, we are monitoring the naughty distributors. We have taken strict action against some of them.

In fact, we have sealed a distributor in Tangerang, Banten, who repackaged Minyakita and sold it at a price above the set selling price. We also took action against a distributor who packed Minyakita in 750 milliliters and sold it at a price of 1 liter.