Trade War and World Uncertainty

The world that humans live in, economically and politically, is now in turmoil and uncertainty. The cause is predictable, because of the unilateral policy of a state entity called the United States (US). On April 2, 2025, US President Donald Trump, declared the imposition of import tariffs on 180 countries which then marked a new round of the start of tariff wars and international trade wars. The US unilateral policy inevitably led to various responses from the leaders of nations which then shook the world. At least, there are two world axes in responding to the US tariff policy, namely the axis that responds to the US tariff war by retaliating or retaliating by increasing tariffs that are considered appropriate. China and Canada are two countries that are included in this axis. Next is the axis that chooses to negotiate or take the initiative to persuade the US to conduct negotiations related to trade policies and the imposition of import tariffs that are considered to benefit the US and countries affected by US reciprocal tariffs (win win).

The efforts of countries that took the initiative to negotiate with the US seem to have paid off. Ahead of the implementation of reciprocal tariffs that will take effect on April 9, 2025, President Donald Trump surprisingly postponed the implementation of reciprocal tariffs for the next 90 days (July 9, 2025) except for China, which continues to apply reciprocal tariffs. This policy apparently did not result in the elimination of the 10 percent import duty tariffs that the US had previously imposed on all countries. Tragically, when announcing the postponement of the implementation of reciprocal tariffs, Trump actually increased the tariff burden on China to 125 percent from the previous 34 percent and increased 104 percent. In fact, Trump is now imposing tariffs on imports from China to 145 percent and recently rose again to 245 percent. As a sovereign country, China responded firmly to the US tariffs by retaliating by raising import tariffs from the US by 125 percent from the previous 34 percent and 84 percent.

Source: Reuters.com

This is the international phenomenon of today. Full of uncertainties and interests of the key actors controlling the course of life of the world community. The trade wars and tariff wars initiated by the US through Donald Trump are essentially the implementation of his ambitions and political campaign promises when he ran again as a presidential candidate in the 2024 US presidential election. In his political campaign, Trump openly promised an America First policy, making the US great, against everything that is considered detrimental or harmful to US national interests. And the concrete thing that Trump evaluated was the trade deficit between the US and other countries in the world. In this case, the US feels disadvantaged by the trade practices of US partner countries, especially by China, so imposing reciprocal tariffs is considered by Trump as a form of compensation for the losses experienced by the US.

However, among the 180 countries affected by Trump's tariffs, China is the one that Trump considers to be a US trade enemy that greatly jeopardizes the future of the US economy. China is often accused by Trump of cheating in trading with the US, which benefits the communist country and harms the US. For this reason, Trump mercilessly imposes high tariffs on imported goods from China. As a result, now anyone can see with the naked eye, the 2025 international trade war as a result of the tariff war declared by Donald Trump is now highlighting more political tensions between the US vs China as a result of the economic policies decided by both.

In any case, after the announcement of the imposition of tariffs on April 2, 2025, the world economy is currently in a state of uncertainty. The form, economic activity such as stock prices on the world stock exchange is unclear, but the tendency is to decline to the detriment of established companies such as Apple, Tesla, Meta, Nvidia, Google, Microsoft, Amazon. Likewise, the exchange rates of countries in the world tend to weaken when converted to the US dollar. World oil prices have also been affected by Trump's tariff policy. Uniquely, the world gold price tends to rise until it touches 3,200 US dollars per troy ounce. On a micro level, a country's national economy is also starting to be affected by Trump's reciprocal tariffs. Indonesia, which is subject to a 32 percent tariff by Trump, can be an example. Now the rupiah exchange rate continues to weaken after the announcement of the US reciprocal tariffs, even touching 17,000 rupiah per 1 US dollar. The Jakarta Composite Index (JCI) in the Indonesian stock market also tends to decline, a lot of foreign capital is leaving Indonesia, and of course inflation and unemployment due to layoffs will be a challenge for Indonesia during the delay of Trump's reciprocal tariffs and the period afterwards.

Indonesia did choose the negotiation route and did not retaliate to Trump's 32 percent import tariff. This is positive; however, Indonesia must still have a clear stance. If in the next three months there is no common ground in the negotiation process with the US side, Indonesia must return to the nation's identity, which is to stand economically, politically sovereign. Indonesia does not need to rely on the US market. From now on, Indonesia needs to think about strategies on how to penetrate markets other than the US. There are still European markets, Latin America, the Middle East, Africa, Australia, Pacific countries, and especially the markets of the global south, especially since Indonesia has officially become a member of BRICS, an economic bloc consisting of Brazil, Russia, India, China, and South Africa.  Hopefully!