Trump Signals More Trade With Indonesia at G-20 Summit, Economists Not So Sure

US President Donald Trump and Indonesia's President Joko Widodo talk during a working session at the G-20 leaders summit in Hamburg on July 8, 2017. (Reuters Photo/Wolfgang Rattay)

By : Tabita Diela | on 9:58 AM July 11, 2017
Category : Business, Featured, Trade

Jakarta. US President Donald J. Trump signaled more trade between the United States and Indonesia might be coming during the G-20 summit in Hamburg last week.

"We’ve become friends, and we’re going to be doing a lot of deals together — trade deals," President Trump said in a bilateral meeting with Indonesian President Joko Widodo on Saturday (08/07), a remark that appeared on the official White House YouTube channel.

"We have our whole trade delegation here, and we will start doing a lot of trading with Indonesia. We do very little business, relatively, now. But we are going to do a lot of business," he said.

According to the Office of the US Trade Representative, the superpower posted a $13.2 billion trade deficit with Indonesia in 2016 — the 16th largest trade deficit it suffered last year.

Indonesia's Trade Ministry meanwhile recorded a $8.8 billion trade surplus with the United States in the same period.

Indonesia earned $16.1 billion from exports of goods and services to the United States last year, which meant the superpower — still the world's largest economy by gross domestic product (GDP) — made up around 11 percent of Indonesia's total exports.

Indonesia also imported $7.3 billion of goods and services from the United States, equivalent to 5.4 percent of the country's total imports.

Don't Expect Too Much

Despite Trump's promises, Eric Alexander Sugandi, the chief economist at consulting company SKHA Institute for Global Competitiveness, warned Indonesia should not expect too much from the G-20 summit, arguing when it comes to implementation and real policy, things may differ significantly to what was signaled.

"The implementation may not match the plan made during the meeting," Erick said, adding that authorities in Indonesia need to look back to Trump's policy that put Southeast Asia's biggest economy in the United States' watch list.

Eric referred to Trump's order to study US trade deficits with 16 countries, including Indonesia, on March 31.

The order set a 90 days deadline for his administration to identify trade abuses and non-reciprocal practices — which resulted in the trade deficits — and develop strategies against "violations of US trade." The United States has never provided further clarity about the order.

Erick said the future of Indonesia-United States trade relationship will depend on the results of the Trump administration's assessment, instead of the outcomes from the G-20 meeting.

The former economist for Standard Chartered Bank in Indonesia said Indonesia does not need to worry about its trade relationship with the United States, as the Southeast Asian country's exports are largely driven by commodity-related products.

Indonesia's US exports are mostly made up of low-tech manufactured goods like shoes, textile and paper, which make up a small percentage of its overall exports figure.

"Indonesia should not be afraid or otherwise too optimistic about trade [with the United States] as a result of the G-20 meeting," he said.

"Around 40 percent to 45 percent of our exports are commodities, and we've seen improvements in commodity prices. Our year-to-date export performance is in surplus and I think, from the looks of it, that surplus will continue," he said.

Indonesia's trade surplus increased in May on the back of strong export growth. The trade surplus came at $474 million, up from $376 million in May 2016, Indonesia's Statistics Agency said.

Exports grew 24.08 percent on a yearly basis in May to $14.29 billion while imports rose 24.03 percent in May to $13.82 billion.

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