What would a US-China trade war do to the world economy?

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Ben Chu

BBC Verify

Getty Images President Donald Trump and President Xi Jinping at a meeting in 2019. US and Chinese flags are visible in the background and the BBC Verify logo is in the top left corner. Trump and Xi are wearing dark suits, with pins representing their respective nations. Getty Images

After President Donald Trump threatened to impose levies of more than 100 % on Chinese goods starting on April 9th, a full-fledged trade war with China and the US is in view.

China has already raised its personal trade barriers in response to what it perceives as US force, and has said it did “fight to the close” rather than” adhere to it.”

What does the global economy’s growing business fight mean?

How many business are they engaged in?

Last year, the trade between the two economic powers increased to about$ 585 billion ( £429 billion ).

Although the US imported far more from China ($ 440 billion ) than China imported ($ 145 billion ) ).

That resulted in a trade imbalance between the US and China of$ 295 billion in 2024, which is the difference between what it imports and exports. That’s a significant trade deficit, which accounts for about 1 % of the US market.

But it’s less than the $1tn figure that Trump has repeatedly claimed this week.

In his first year in office, Trump now imposed considerable tariffs on China. His son Joe Biden continued to add to and keep those taxes in position.

Collectively, these trade barriers helped lower the amount of products the US imported from China from a 21 % share of the country’s total goods in 2016 to 13 % last year.

So over the past ten years, the US has become less dependent on China for business.

However, experts claim that some Chinese products that are exported to the US have been routed through South-east Asian nations.

For example, the Trump administration imposed 30% tariffs on Chinese imported solar panels in 2018.

But the US Commerce Department presented evidence in 2023 that Chinese solar panel manufacturers had shifted their assembly operations to states such as Malaysia, Thailand, Cambodia and Vietnam and then sent the finished products to the US from those countries, effectively evading the tariffs.

Due to the new “reciprocal” taxes that will be imposed on those nations, the US price of a variety of products that will eventually come from China will rise.

What do the US and China transfer from one another?

Beans, whose main imports from the US to China were beans in 2024, made up of 440 million pigs, were the most popular product class there.

Additionally, the US delivered medicine and gas to China.

From China to the US, there were significant amounts of devices, computers, and games going the other way. Additionally, a sizable number of batteries that are essential for electric cars was exported.

Phones make up 9 % of the total goods from the US, making up the largest category of imports from China. For Apple, a US-based foreign, a large proportion of these phones are produced in China.

One of the main factors in the decline in the market value of Apple in recent weeks has been the US tariffs on China, with its share price falling by 20 % over the past month.

Due to the 20 % tax the Trump presidency has already imposed on Beijing, all these imported goods to the US from China were already going to be significantly more expensive for Americans.

The impact may be five times worse if the price were to increase to 100 % for all items.

Additionally, US imports into China will increase in price as a result of China’s hostile tariffs, which will eventually harm Foreign consumers in a similar way.

Beyond levies, these two countries may also try to aggravate one another through trade.

China plays a significant role in refining a variety of essential metal, including copper and lithium to exceptional rocks.

Beijing might put obstacles in the way of these metal reaching the US.

This is something it has already done in the case of two materials called germanium and gallium, which are used by the military in thermal imaging and radar.

In terms of US policy, it might try to enact a tighter legal framework that Joe Biden initiated by preventing China from importing the kind of advanced microchips it doesn’t still develop itself.

Peter Navarro, Donald Trump’s business consultant, suggested this week that the US had put pressure on other nations like Cambodia, Mexico, and Vietnam to stop trading with China if they want to keep exporting to the US.

How does this impact another nations?

According to the International Monetary Fund, the US and China jointly account for approximately 43 % of the global market this season.

If they decided to start a trade war that would slow their growth, or even cause them to go into crisis, other nations ‘ economy would suffer as a result of slower global growth.

World investment would probably suffer as well.

There are additional possible effects.

China produces far more than its domestic people does, making it the largest country in the world.

It already has a surplus of almost$ 1 billion worth of goods, which indicates that it exports more products than it imports.

And it frequently produces those goods for less than the actual cost of production as a result of local subsidies and state financial support, such as low loans, for the wealthy.

Steel is a good illustration of this.

Foreign companies may try to “dump” these products abroad if they were unwilling to enter the US.

That may be advantageous for some consumers, but it might even hurt manufacturers in nations that are putting jobs and wages at risk.

The hall party UK Steel has been informing about the danger of too much steel being redirected to the UK marketplace.

The global effects of a comprehensive China-US trade war may be felt, and the majority of economists believe the impact would be very damaging.

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Trump tariffs set to hamper growth of key ASEAN economies, posing tough test for some leaders

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Siwage Dharma Negara, an economist and co-director of the Indonesia Studies Program at the ISEAS-Yusof Ishak Institute, claimed that a lack of negotiations with the US does detract from this passion. &nbsp,

If the US imposes a 32 % tariff on Indonesian exports, he said, it will put a significant strain on Prabowo’s ambitious goal of achieving 8 % economic growth during his term.

Even a 5 % growth target is made more challenging by these setbacks, according to the report.

Jakarta’s economy is “very delicate” to US taxes, according to Bhima Yudhistira Adhinegara, director of the Center for Economic and Law Studies in Indonesia.

At the end of the day, Foreign companies even send their products to the US, he told CNA.” Whatever goods we produce and send to China, for example, we also send our products to the US,” he said.

” The second reason is due to the dollar fluctuations. Rupiah’s exchange rate is very sensitive to everything, including imports of raw materials, remittances, and the ( rising ) living expenses Indonesian consumers will soon have to bear.

Bhima warned that Indonesia could face twin harm as major manufacturing centers like China and Vietnam work to avoid US tariffs on alternative markets, particularly Indonesia’s large customer base.

This means that Indonesia won’t be able to fully capitalize on its own base because local products, which are usually exported to the US, cannot compete with those from China and Vietnam, whose products will soon flooded the domestic market.

Because the rates are a little bit high, he explained, “it makes it very difficult, from the Indonesia manufacturers ‘ viewpoint, to move their goods from the US market to the local market around.”

On Tuesday, Indonesia made a number of concessions to US imports, including lowering material and digital goods taxes.

Finance Minister Mulyani Indrawati announced that Indonesia may even lower US transfer fees on mine and health products. &nbsp,

Indrawati claimed that under the new tax regime, Indonesia could remove Vietnam, Bangladesh, Thailand, and China as a cause of some export to the US.

Next week, a high-level delegation from Southeast Asia’s biggest economy may travel to the US to seek a deal to lower the influence of its 32 % price.

Jokowi has emphasized that political negotiations will be conducted instead of hostile measures in his country.

In addition, Indonesia will purchase liquefied petroleum gas, liquid natural gas, and beans from the US as part of the negotiations, according to general economic minister Airlangga Hartarto, who will guide Indonesia’s group to the US.

Bhima argued that Jakarta has not taken the issue seriously, noting that there have been two years without the position of Indonesia’s envoy to Washington.

The analyst urged the Prabowo government to “act quickly” and begin developing fiscal stimulus plans, including looser loan or credit terms for industries that have been hit by US tariffs. These include utility discounts for entrepreneurs and looser utility discounts for entrepreneurs.

We want to keep our optimism up, but we must acknowledge that there is a significant issue ahead, he said.” The Indonesian government lacks the sense of crisis.

Further economic issues will result from failing to achieve 8 % growth, according to Bhima, adding to the already waning public trust in the current administration as a result of recently contentious decisions regarding the roles of the police and military.

I believe that trust in the central bank and government will decline if people see the impact of the US tariffs becoming uncontrollable and the currency ( let’s say, 18 000 per dollar ) weakens further.

The Indonesian economy will suffer as a result of the (added ) political instability. In that regard, Indonesia’s future is not promising. People are already fed up with this.

The socioeconomic analyst Oh in Malaysia noted that the effects of a 24 % US tariff rate could lead to higher prices, job losses, and fewer economic opportunities.

Voters may not distinguish between domestic policy failures and global trade dynamics, he said, because they are notoriously sensitive to immediate economic pressures, and he said Anwar’s leadership is responsible for their hardships.

” This vulnerability gives opposition parties a potent political narrative that presents the downturn as a case study of governmental incompetence,” according to some.

Oh agreed that the tariffs are a “double-edged sword” for Anwar, who has a “rare chance to demonstrate resilience and vision” in guiding Malaysia through this troubled period.

He cited how many Malaysians still give thanks to former prime minister Mahathir Mohamad’s efforts to stabilize the nation after the Asian Financial Crisis in 1997 by converting the ringgit to the US dollar.

The political payoff could be significant at both national and regional ( ASEAN ) stages, he added.” So, if Anwar navigates this storm effectively, minimising economic damage relative to neighbors, this will be significant,” he continued.

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Trump tariffs could hit ASEAN economies hard, with potential political price for leaders

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Siwage Dharma Negara, an economist and co-director of the Indonesia Studies Program at the ISEAS-Yusof Ishak Institute, claimed that a lack of negotiations with the US will detract from this passion. &nbsp,

The US’s 32 % tax on Indonesian exports will be a major obstacle to Prabowo’s ambitious goal of achieving 8 % economic development during his term, he added.

Even a 5 % growth target is made more challenging by these setbacks, according to the author.

Bhima Yudhistira Adhinegara, chairman of the Indonesian Center for Economic and Law Studies, claimed Jakarta’s relationship to the global supply chain makes it “very hypersensitive” to US taxes.

At the end of the day, Foreign companies even send their products to the US, he told CNA.” Whatever goods we produce and send to China, for example, we also send our products to the US,” he said.

” The second reason is due to the dollar fluctuations. The ( rising ) living expenses that Indonesian consumers will soon have to bear are all very sensitive to rupees, especially raw material imports and remittances.

Bhima warned that as key manufacturing centers like China and Vietnam work harder to avoid US tariffs, Indonesia could face a double blow.

This means that Indonesia won’t be able to fully capitalize on its own base because local products, which are usually exported to the US, cannot compete with those from China and Vietnam, which will quickly monopolize the domestic market.

Because the costs are a little bit high, he explained, “it makes it very difficult for Indonesia exporters to move their items from the US market to the local market here.”

On Tuesday, Indonesia made a number of concessions to US imports, including lowering material and digital goods taxes.

Indonesia’s finance minister Mulyani Indrawati announced that the US would also decrease its import taxes on mining-related goods and medical equipment. &nbsp,

Indrawati claimed that under the new tax regime, Indonesia could remove Vietnam, Bangladesh, Thailand, and China as a cause of some export to the US.

Next month, a high-level delegation from Southeast Asia’s biggest economy may travel to the US to seek a deal to lower the influence of its 32 % price.

Jokowi has emphasized that political negotiations will be conducted instead of hostile measures in his country.

In addition, Indonesia does purchase liquefied petroleum gas, liquid natural oil, and beans from the US as part of the negotiations, according to general economic minister Airlangga Hartarto, who will guide Indonesia’s group to the US.

Bhima claimed that Jakarta has not shown” seriousness” in addressing the problem, noting that the position for Indonesia’s envoy to Washington has been vacant for two years.

The researcher urged the Prabowo state to “act quickly” and begin developing fiscal stimulus plans, including looser loan or credit conditions for industries that have been hit by US tariffs. These include energy discounts for entrepreneurs and looser power discounts.

” The Indian government lacks the sense of crisis, but we want to preserve our optimism going,” he said.” But we also need to acknowledge that there is a significant issue ahead.”

Further economic issues will worsen already waning public confidence in the current administration due to recent contentious procedures involving the functions of the police and military, according to Bhima.

I believe that people’s confidence in the central bank and the government will decline if they see the impact of the US tariffs becoming uncontrollable and the currency ( let’s say, 18 000 per dollar ) weaken further.

The Indonesian economy will suffer as a result of the (added ) political instability. In that regard, Indonesia’s future is not promising. Individuals are now “tired” of it.

The economic analyst Oh in Malaysia noted that the effects of a 24 % US tax rate could lead to higher pricing, job losses, and fewer economic opportunities.

Voters may not be able to tell the difference between private policy failures and global trade dynamics, he said, because they are extremely sensitive to immediate economic pressures and are therefore attributed to Anwar’s leadership.

This risk gives criticism parties a strong social narrative that frames the downturn as evidence of political incompetence, or as some might say “balls” of it.

Oh agreed that Anwar’s tariffs are a “double-edged weapon” for him because he has a “rare chance to demonstrate endurance and vision” in guiding Malaysia through this difficult time.

He cited how many Malay still give thanks to former prime minister Mahathir Mohamad’s efforts to stabilize the nation after the Asian Financial Crisis in 1997 by converting the ringgit to the US dollars.

The political payoff could be significant at both national and regional ( ASEAN ) stages, he added.” So, if Anwar navigates this storm effectively, minimising economic damage relative to neighbors, this will be significant,” he continued.

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China is not backing down from Trump’s tariff war. What next?

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Yvette Tan, Annabelle Liang and Kelly Ng

Reporting fromSingapore
Getty Images Xi Jinping, dressed in a dark blue suit and purple tie, arrives for a bilateral meeting at the Government Palace in Lima, Peru, on Thursday, Nov. 14, 2024. Getty Images

The trade war between the world’s two biggest economies shows no signs of slowing down – Beijing has vowed to “fight to the end” hours after US President Donald Trump threatened to nearly double the tariffs on China.

That could leave most Chinese imports facing a staggering 104% tax – a sharp escalation between the two sides.

With a deadline looming in Washington as Trump threatens to introduce the additional tariffs from Wednesday, who will blink first?

“It would be a mistake to think that China will back off and remove tariffs unilaterally,” says Alfredo Montufar-Helu, a senior advisor to the China Center at The Conference Board think tank.

“Not only would it make China look weak, but it would also give leverage to the US to ask for more. We’ve now reached an impasse that will likely lead to long-term economic pain.”

Global markets have slumped since last week when Trump’s tariffs, which target almost every country, began coming into effect. Asian stocks, which saw their worst drop in decades on Monday after the Trump administration didn’t waver, recovered slightly on Tuesday.

Meanwhile, China has hit back with tit-for-tat levies – 34% – and Trump warned that he would retaliate with an additional 50% tariff if Beijing doesn’t back down.

Uncertainty is high, with more tariffs, ranging to more than 40%, set to kick in on Wednesday. Many of these would hit Asian economies: tariffs on China would rise to 54%, and those on Vietnam and Cambodia, would soar to 46% and 49% respectively.

Experts are worried about the speed at which this is happening, leaving governments, businesses and investors little time to adjust or prepare for a remarkably different global economy.

How is China responding to the tariffs?

China had responded to the first round of Trump tariffs with tit-for-tat levies on certain US imports, export controls on rare metals and an anti-monopoly investigation into US firms, including Google.

This time too it has announced retaliatory tariffs, but it also appears to be bracing for pain with stronger measures. It has allowed its currency, the yuan, to weaken, which makes Chinese exports more attractive. And state-linked enterprises have been buying up stocks in what appears to be a move to to stabilise the market.

Getty Images A female worker in a dark blue shirt is working at a production workshop of a silk company in Chongqing, China, on March 8, 2024. Getty Images

The prospect of negotiations between the US and Japan seemed to buoy investors who were fighting to claw back some of the losses of recent days.

But the face-off between China and the US – the world’s biggest exporter and its most important market – remains a major concern.

“What we are seeing is a game of who can bear more pain. We’ve stopped talking about any sense of gain,” Mary Lovely, a US-China trade expert at the Peterson Institute in Washington DC, told the BBC’s Newshour programme.

Despite its slowing economy, China may “very well be willing to endure the pain to avoid capitulating to what they believe is US aggression”, she added.

Shaken by a prolonged property market crisis and rising unemployment, Chinese people are just not spending enough. Indebted local governments have also been struggling to increase investments or expand the social safety net.

“The tariffs exacerbate this problem,” said Andrew Collier, Senior Fellow at the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School.

If China’s exports take a hit, that hurts a crucial revenue stream. Exports have long been a key factor in China’s explosive growth. And they remain a significant driver, although the country is trying to diversify its economy with high-end tech manufacturing and greater domestic consumption.

It’s hard to say exactly when the tariffs “will bite but likely soon,” Mr Collier says, adding that “[President Xi] faces an increasingly difficult choice due to a slowing economy and dwindling resources”.

It goes both ways

But it’s not just China that will be feeling the impact.

According to the US Trade Representative office, the US imported $438bn (£342bn) worth of goods from China in 2024, with US exports to China valued at $143bn, leaving a trade deficit of $295bn.

Getty Images Aerial view of yellow engineering vehicles waiting to be loaded onto a ship for export at Lianyungang Port on April 7, 2025 in China's Jiangsu Province. Getty Images

Smartphones, computers, lithium-ion batteries, toys and video game consoles make up the bulk of Chinese exports to the US. But there are so many other things, from screws to boilers.

And it’s not clear how the US is going to find alternativ supply for all these goods on such short notice.

Taxes on physical goods aside, both countries are “economically intertwined in a lot of ways – there’s a massive amount of investment both ways, a lot of digital trade and data flows”, says Deborah Elms, Head of Trade Policy at the Hinrich Foundation in Singapore.

“You can only tarriff so much for so long. But there are other ways both countries can hit each other. So you might say it can’t possibly get worse, but there are many ways in which it can.”

The rest of the world is watching too, to see where Chinese imports shut out of the US market will go.

They will end up in other markets such as those in South East Asia, Ms Elms adds, and “these places [are dealing] with their own tariffs and having to think about where else can we sell our products?”

“So we are in a very different universe, one that is really murky.”

How does this end?

Unlike the trade war with China during Trump’s first term, which was about negotiating with Beijing, “it’s unclear what is motivating these tariffs and it’s very hard to predict where things might go from here,” says Roland Rajah, lead economist at the Lowy Institute.

China has a “wide toolkit” for retaliation, he adds, such as depreciating their currency further or clamping down on US firms.

“I think the question is how restrained will they be? There’s retaliation to save face and there’s pulling out the whole arsenal. It’s not clear if China wants to go down that path. It just might.”

Getty Images People can be seen crossing the road next to a blue screen with a stocks indicator in the Jing'an district in Shanghai on the evening of April 7, 2025.Getty Images

Some experts believe the US and China may engage in private talks. Trump is yet to speak to Xi since returning to the White House, although Beijing has repeatedly signalled its willingness to talk.

But others are less hopeful.

“I think the US is overplaying its hand,” Ms Elms says. She is sceptical of Trump’s belief that the US market is so lucrative that China, or any country, will eventually bend.

“How will this end? No-one knows,” she says. “I’m really concerned about the speed and escalation. The future is much more challenging and the risks are just so high.”

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Sachin Chawla to lead MongoDB in India and Asean

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  • joined MongoDB to take over the Indian business in February 2022.
  • has more than 20 years of sales encounter, including positions at AWS and BMC Software.

In order to promote growth and customer value in both the Indian and Asean markets, MongoDB, the world’s leading database for modern applications, has announced Sachin Chawla ( pic ).

Sachin joined MongoDB in February 2022 to guide the India firm, having held leadership positions at Amazon Web Services and BMC Software. Working with clients like Tata Digital, Canara HSBC, Zepto, Zomato, and Intellect AI, he has played a crucial role in driving strong growth in the area since then. Sachin will travel to Singapore as part of his expanded position.

Over the past three decades, there has been a 70 % increase in staff at MongoDB India, in addition to a number of initiatives, including a national efforts to provide more than 500, 000 individuals with crucial data and AI knowledge.

MongoDB now has a strong reputation throughout Asean as the nation’s leading contemporary document database provider. Along with having a sizable and active designer group, Aktivo Labs, Dkatalis, M-DAQ, and Grab are just a few examples of its growing clientele in the region.

MongoDB stands out as a leader in the adoption of AI across APAC for its ability to support various workloads, adequacy of data management, and speed up application modernization. Businesses are now able to stay on top of their needs with the development of a thoroughly integrated, AI-ready information program.

” Asean and India each have expansive developer communities and active business climates. Both are perfectly positioned for expansion in the Artificial period. I’m convinced that Sachin will be the right person to develop MongoDB’s appearance in Asean and offer true value to our customers, teams, and partners,” said Simon Eid, senior vice president of APAC at MongoDB.

MongoDB recently expanded the MongoDB Atlas presence in Southeast Asia, launching aid for AWS areas in Thailand and Malaysia. The decision comes in response to a significant increase in the area, where personnel has increased by over 200 % in the last two years.

” I’m proud of the group we’ve assembled in India and the positive impact our efforts have had on local clients who are developing revolutionary software. I’m energized by the possibilities that lie ahead in Asean now that AI is popular. It’s exciting at this time for these two areas, Sachin said, using technology like MongoDB.

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Cinch raises US.8 mil to expand device-as-a-service platform across Asia

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  • To create an OS for robust system membership, money will be used.
  • claims it has reduced e-waste, increased value for consumers & businesses, and increased it affordability

The leadership team at Cinch

Cinch, the largest device-as-a-service ( DaaS ) platform in Asia, has announced a funding round of up to USD$ 28.8 million ( RMRM 129 million ) to expand its subscription-based tech ecosystem. Monk’s Hill Ventures led the large, while Faeda Ventures, 1982 Ventures, Ratio Ventures, DCG, Feedback Ventures, and Z Venture Capital also participated.

This boost will help Cinch advance toward the development of a distributed elliptical machine at scale, opening the door to technology that enables distributors, telcos, and retailers to easily integrate device subscriptions into their current sales and service models.

Access to devices like smartphones, laptops, and tablets is made possible by Cinch’s subscription model, which is flexible, affordable, and responsible. Consumers can switch to the most recent technologies with affordable monthly rates, avoiding long-term contracts and upfront costs. Cinch simplifies system purchasing, financing, and lifecycle management for businesses, maximizing both cost and efficiency.

The company uses a circular subscription design to minimize economic impact while maximizing device life. Cinch claims that repurposing and repurposing equipment throughout several lifetimes will reduce e-waste and increase the price of goods both for consumers and businesses. Cinch claims its amazing system combines embedded financing, active costs intelligence, and automated lifecycle management, ensuring capital efficiency while enabling devices to produce long-term value beyond a single ownership cycle.

Modify and responsible disposal are incorporated into the base of engineering consumption, according to the company, which improves economic accessibility and supports international sustainability goals.

” Tech is changing the way people consume it. Cinch is leading the movement toward round software due to rising costs, funding gaps, and growing regulatory strain on e-waste. Beyond a system, we’re tying the dots between Asia’s facilities for a green tech economy, according to Mahir Hamid, CEO and co-founder of Cinch.

The business has quickly established itself as Asia’s largest spiral tech provider, enabling sustainable distribution of high-quality products at level across essential markets. Samsung Electronics Singapore is one of its key partners, and Cinch was recently announced as its standard membership mate for the Galaxy S25 Series in Singapore. Shoppers may pay a monthly fee for Samsung’s premier smartphone that comes with harm security and an upgrade choice at the end of the word.

Working with Cinch, we’ve chosen to support our sustainability goals while also offering our customers in Singapore a flexible and economical option to own our most recent products. The brand’s important goal is to achieve tool incoherence for our goods throughout their whole life cycles, and Cinch’s device-as-a-service supports this goal while keeping the aspirations of consumers to have access to the most recent technological innovations in the market, according to Timothy Tan, director and head of integrated B2B, Samsung Electronics Singapore.

Cinch works at the intersection of upholding consumer aspirations, promoting industry digitalization, and promoting environmental sustainability. These value propositions are particularly relevant in Southeast Asia, where young people and a growing middle class aspire to own the newest devices, and where businesses are rapidly digitalizing through mobile technology, according to Kuo-Yi Lim, co-founder and managing partner at Monk’s Hill Ventures.

This also extends the life of electronic devices and reduces e-waste, making it ultimately a win-win-win for everyone. We are pleased to be a key member of the Cinch team in this crucial mission, he continued.

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Malaysia aims to generate US.7 billion in annual medical tourism revenue by 2030

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The nation is developing strategies to attract even more foreign patients, not just for treatment, but for a thorough experience based on trust, comfort, and detailed care.

Medical tourists visiting Malaysia right now come from South Asia, the Middle East, and perhaps Europe as well as the traditional areas of Indonesia and China.

By the end of the year, the MHTC is leading efforts to expand the sector and improve the nation’s position as a leading global health hub.

The agency’s CEO Mohamed Ali Abu Bakar said,” We must be prepared, because the problem we have- we must own power.” &nbsp,

” Even in Malaysia right now, we have ( a ) lot of hospitals adding buildings and building brand-new ones,” Dr. Mohamed Ali continued.” Hope the capacity is there for us to achieve these goals.”

In order to remain competitive in a packed market with rising global demand, the nation is focusing on quality, pricing, and individualized services.

Cost continues to be a crucial factor for both local and foreign individuals as health inflation continues to become a global issue.

However, according to experts, Malaysia’s rising costs won’t actually change medical tourists.

According to Dr. Kuljit Singh, chairman of the Association of Private Hospitals Malaysia,” Even though the cost may improve, it is still deemed to be cost-effective,” because we are still one of the most affordable nations in terms of medical expenses.

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Indonesia’s Prabowo asleep at the wheel on Trump tariffs – Asia Times

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JAKARTA – One week since President Donald Trump’s “Liberation Day” tariffs threw the global economy into turmoil and Indonesia’s government seems to have been caught flat-footed.

Adopting the same conciliatory position as most of ASEAN, the country is looking for a tariff-easing deal. But, with domestic economic policymaking chaotic and the foreign ministry adrift, forming a coherent response may be difficult for Southeast Asia’s biggest economy.

Indonesian stocks dropped more than 9% today (April 8) as trading resumed for the first time since March 27 and recovering after a 30-minute halt. The rupiah fell as much as 1.8% versus the dollar in early trading, closing in on a record low, while bonds also slumped.

There seems no easy way for Indonesia to absorb its Trump-assigned 32% tariff. The apparel and footwear industries will both be hit hard. Nike and Adidas, between them, have about half their labor force stationed in Indonesia. The furniture industry, which exports about half its product to the US, will also likely be driven to the wall.

Comparatively, Indonesia has not taken the hardest direct hit. With a large domestic market, the country’s export-to-GDP ratio stood at 24.5% in 2023. That year, only 9.35% of its exports by value went to America.

Exports of commodities like coal, palm oil and metals go largely to China, Japan, India, and other Asian countries, which make up a large percentage of Indonesia’s total exports.

Compared to Vietnam – which is facing 46% tariffs, has an export-to-GDP ratio of 87.2%, and sent 27.8% of its export’s total value to the US in 2023 – Indonesia’s tariff crisis is less severe.

Still, the challenge should not be underestimated. A global recession, which seems increasingly likely, would depress Indonesia’s crucial commodity exports.

And while Indonesia is not as export-dependent as others, they do play a vital role in earning the dollars it needs to sustain its imports of crucial items, including fuel and food.

“Yes, Indo is less exposed to tariffs,” notes Siwage Dharma Negara, co-coordinator for the Indonesia Studies Program at ISEAS. “But its exports contribute to foreign exchange reserves, which will be depleted quickly. We need to anticipate more pressure on the rupiah. This, in turn, will have an adverse impact on its imports of critical inputs and raw materials.”

Facing this difficult situation, Indonesia has reacted like much of ASEAN by quickly looking for a deal. “We will also open negotiations with America. We will say: ‘We want a good relationship. We want a fair relationship. We want an equal relationship,’” President Prabowo Subianto told journalists April 7 in his first public comments on the matter.

It seems Indonesia is looking to coordinate with Malaysia or perhaps ASEAN writ large, with Prabowo discussing the matter with Prime Minister Anwar Ibrahim, who currently is the rotational chair of the bloc.

“Not retaliating is the overall strategy from ASEAN countries, hoping Trump will be willing to make exceptions,” explains Dewi Fortuna Anwar, co-founder of the Foreign Policy Community of Indonesia.

“Trump is committed to protect the US market, but like the Godfather he’ll likely be more generous to those willing to kiss the ring. As SEA is the epicenter of US-China rivalry, Trump will probably not want to push the region completely into the China orbit. But some kowtowing will be required.”

Trade negotiations could prove tough, though. Trump has signaled resolve to stick to the tariffs despite plunging stock markets and his goals seem quixotic, if not unreachable. Speaking to reporters recently, Trump said he would not strike any deal to cut tariffs unless it also eliminated the US trade deficit with that country.

Meanwhile, Indonesia’s chaotic governance may leave it struggling to deal with the extremely difficult task of managing both the domestic economic fallout and trade negotiations with the US administration.

Notably, Indonesia does not currently have an ambassador in Washington DC and has not had one for two years. Speaking off the record, senior civil servants talk of entrenched dysfunction at the foreign ministry.

Speaking with a now-retired veteran diplomat, this writer commented that Indonesia seemed to have been caught with its pants down on the tariff announcement. “If any pants all,” came the dry reply.

Part of the problem is that President Prabowo fancies himself an international statesman, spending roughly one-third of his first 100 days on marathon trips abroad, mostly to attend summits.

As foreign minister, instead of the veteran diplomat, Prabowo appointed his extremely inexperienced aide Sugiono – a move widely seen as meant to allow Prabowo to dictate foreign policy to a junior who is dependent on him.

The result has been disorganization internally and embarrassing botches externally. Most notably, Indonesia seemed so desperate for new deals with China that it briefly appeared to acknowledge China’s claims to Indonesian territorial waters soon after Prabowo’s inauguration. None of this augurs well for managing Trump.

As for domestic economic policy, Indonesia was starting to struggle economically well before the tariff announcement, in large part due to erratic policymaking.

Structural factors like weakening consumer spending and a rupiah hitting lows last seen during the pandemic have been exacerbated by fears about the government’s populist spending policies.

The government has slashed huge swathes of the state budget to channel money into a school meals program. And a new holding company for state-owned enterprises (SOEs) that lacks parliamentary scrutiny and reports to the president has sparked fears of a 1MDB like-scenario.

The result has been foreign capital flight at alarming rates. A market crash in mid-March saw trading briefly suspended on Indonesia’s stock exchange.

Rumors swirl that Finance Minister Sri Mulyani Indrawati, seen as key to the government’s bids to maintain credibility with markets, and Coordinating Minister for Economic Affairs Airlangga Hartarto attempted to resign but were turned down.

Both ministers have denied the claims. However, sources with purported knowledge of the requested resignations claim otherwise.

All this bodes ill for dealing with Trump. One way to deal with Trump’s tariffs would be to seek new markets for Indonesia’s exports. Signing a long-delayed trade deal with the European Union and deepening integration with ASEAN would be two quick wins.

Such moves would likely find some of their strongest support in the government from figures like Sri Mulyani and Airlangga – whose standings have apparently been weakened.

Another, perhaps likelier possibility, is that Indonesia will default to its usual highly protectionist instincts – even if this proves self-defeating.

Worries about cheap Chinese imports destroying local manufacturers were already ubiquitous before Trump’s tariff bomb. As tariff-hit Chinese businesses desperately seek markets outside the US, it seems like worries about this – and pressure to block imports – will grow.

Prabowo himself has fundamentally autarchic economic instincts. Coming into office, he declared food and fuel self-sufficiency as top policy priorities.

Speaking on economic issues at international summits, he has often displayed a Trumpian suspicion of trade, suggesting Indonesia is exploited by trade partners and made vulnerable to outside shocks. Trump’s tariffs could seem to Prabowo as confirmation of such views – and push him deeper toward dangerous notions of self-reliance.

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