The Economic Consequences and Strategies of the US-China Trade War to Indonesia: A GTAP Simulation Analysis
Muhammad Rizal Taufikurahman (a*), Heri Ahmad Firdaus (b)

(a) Trilogi University, Jl. Kampus Trilogi No.1 TMP Kalibata, Jakarta, 12760, Indonesia
*mrizalt[at]trilogi.ac.id
(b) Institut Bisnis dan Informatika Kwik Kian Gie, Jl. Yos Sudarso Kav 87 Sunter, Jakarta, 14350, Indonesia

Abstract

At present, the world economy is in uncertainty. One reason is that two economically large countries, namely the United States (US) and China are in conflict and beat the drums of trade war. Relations between the two countries are increasingly heating up after President Trump officially started a trade war against China on July 6, 2018. This is indicated by the policy of US applying tariffs on a number of Chinese products, and then responded very quickly by China by implementing a reply tarriff. The aim of this study is to analyze the economic consequences of the US-China trade war for Indonesia and Indonesias strategies to respond to the trade war. The analytical method used is the Global Trade Analysis Project (GTAP) model. The results of the analysis show that the consequences or impact of the US-China trade war on the performance of macroeconomic indicators such as investment and consumption increased by 0.02% and 1.13%, respectively. Its just that for the added value obtained it decreases by 0.02%. This condition resulted in a decreasing of the national aggregate output amount to 0.01%. The declining in national output came from the decreasing in output in several industries such as the textile and textile products industry, yarn industry, apparel industry, and pulp and paper industries which were 2.11%, 1.61%, 1.32% and 0.36%, respectively. Some short-term strategies that need to be done are increasing export competitiveness, encouraging export-oriented industrial productivity, expanding and strengthening domestic and world markets, and controlling the amount of imports. Long-term strategies include the need to improve the quality of human resources in the trade and industry sectors, labor productivity, utilization of the results of research and development, and optimization of training and education institutions.

Keywords: economic consequences; strategies; US-China trade war; GTAP analysis

Topic: Trade policies strategic Responses

Link: https://ifory.id/abstract-plain/AeGKk3CrtuxY

Web Format | Corresponding Author (Muhammad Rizal Taufikurahman)