U.S.–China Trade Tensions on Indonesia's Trade and Investment

Abstract

Our paper describes how the U.S.–China trade tensions affect Indonesia's trade and investment. The direct impacts come through increasing uncertainties, lower world demand, and diverted East Asian regional production networks. The indirect impacts can be observed in trade and investment reallocations. Amidst the tension, in 2018, the Indonesian economy grew 5.17 percent with reserves of 6.7 months of imports. Its trade with the United States and China grew by 7.5 percent and 23.5 percent, respectively. Although creating opportunities for Indonesia in the short run, trade tensions will repress the world economy. Indonesia understands that trade openness will improve productivity and we believe it will continue its reforms to be more open and integrated into the world economy.