27 Juli 2018 By Publikasi IIS

United States’ Trade War, a New Chapter of the Global Trade Regime

United States’ Trade War, a New Chapter of the Global Trade Regime

President Donald Trump’s controversial policy, once again, challenge international observers in understanding the more dynamic and unpredictable global politics.

The new tariffs imposed by the United States (US) apparently brought unprecedented consequences. The policy, initially addressed to suppress US trade deficit, was responded by an increase of tariff from several actors, including China, Canada, and the European Union —which later leads to a trade war.

“The initial assumption was other entities would follow US policy. They were actually very dependent towards US market”, explained Azza Bimantara, researcher of the Institute of International Studies during the discussion Waging Trade War: Trump’s Protectionist Policy through Economic Nationalism Perspective (26/7).

Compiled from various sources

To date, US has become an export destination from China, South Korea, Malaysia, Canada, and the European Union. On average, commodities exported to the US contribute 15-20% of each country’s GDP. Following the recent tariff increase, Canada and Mexico retaliated by increasing their tariff on agriculture products. Meanwhile, European Union retaliated by raising tariff on automotive and several fashion products. Afterwards, South Korea followed with solar panel and washing machine.

Azza added that the on-going trade war has break the assumption on how democratic countries will not go on a war with each other.

According to Dr. Riza Noer Arfani —Director of the Institute of International Studies and lecturer at International Relation department UGM— this phenomenon could mark the decreasing of US influence in global politics. According to theory, other country will emerge and replace US role, and in this context China has a potential to take over.

“This is seen by how China starts to strengthen their epistemic community and utilize such knowledge for their trade interest and international politics.”

Given its position as a non-strategic trading partner, trade war will not directly affect Indonesia.

“However, considering how little World Trade Organization’s (WTO) role is in this dynamics, Indonesia needs to learn to conduct bilateral negotiation with its trading partners,” said Azza.

Considering Trump’s vision and his tendency to implement protectionism, Indonesia can no longer depend on WTO. There’s a huge potential in which US will revoke the special treatment towards commodity from Indonesia, and at this point, bilateral negotiation is needed.

Writer: Imas Indra Hapsari
Translator: Sonya Teresa