The cancellation of Donald Trump\u2019s tariffs by the US Supreme Court\nmarks a significant moment in the architecture of global trade. The\ntariff policy, previously a primary instrument of US protectionism, now\nfaces legal delegitimisation. The question is not merely \u201cwhat has\nchanged\u201d, but \u201cwho is ready to capitalise on this change\u201d, and who will\nbe left behind.<\/p>\n
The global economy is currently experiencing a \u201cdouble shock\u201d:\ngeopolitical disruption (the Iran\u2013Israel conflict potentially drawing in\nthe US) and the realignment of US trade policy. To date, there has been\na strong assumption that Trump\u2019s tariffs served as a \u201cbuffer\u201d against\nimport penetration (particularly from China). And, without tariffs,\ntrade would automatically recover. This is an overly simplistic\nassumption.<\/p>\n
According to the International Monetary Fund (IMF), global growth in\n2025 is projected at around 3.1%, still below the historical average\n(~3.8%). On the other hand, the Middle East conflict has pushed Brent\noil prices back into the USD 85\u201395 per barrel range.<\/p>\n
Therefore, the tariff cancellation creates two simultaneous effects:\ntrade disinflation (import prices to the US fall, pressuring global\ninflation downwards), and a rebound in demand, in the form of increased\nUS imports, which could revive global trade chains.<\/p>\n
However, the Iran\u2013Israel conflict is holding back these positive\neffects. The risk of disruption in the Strait of Hormuz, a route for\nabout 20% of the world\u2019s oil trade, is causing markets to remain\nvolatile. The world is not heading towards stability, but rather a phase\nof \u201cnew imbalance\u201d: partial liberalisation amid escalating\ngeopolitics.<\/p>\n
Countries previously affected by the tariffs, such as China, the\nEuropean Union, and ASEAN, have developed adaptive strategies during the\ntrade war. However, it appears that a number of countries previously\nimpacted by the tariffs have differing responses. One group is\noptimistic that the tariff cancellation offers a chance to reopen the US\nmarket, thereby increasing exports. The other group is pessimistic\nbecause the tariff cancellation will drive changes in trade structures,\nparticularly reshoring and friend-shoring, which must continue.<\/p>\n
According to the World Trade Organization (WTO), global trade has\nexperienced significant trade diversion since 2018. Vietnam, Mexico, and\nIndia have replaced some of China\u2019s position in the US market. Partner\ncountries are no longer simply waiting for renewed access to the US\nmarket, but are strengthening regional agreements (RCEP, CPTPP),\naccelerating export market diversification, and promoting the creation\nof domestic substitute industries.<\/p>\n
Economist Dani Rodrik emphasises that globalisation is now entering a\nphase of \u201cre-embedded globalisation\u201d, where domestic politics determine\nmore than market efficiency. The tariff cancellation does not\nautomatically restore the status quo ante. Partner countries are instead\ndeepening \u201cde-risking\u201d strategies against the US.<\/p>\n
An intriguing question arises: does the tariff cancellation\nstrengthen or weaken the US economy? There are two variables that can\nbridge an answer to this question: the neoclassical approach, which\nviews tariffs as distortions that eliminate efficiency gains. And, the\npolitical-economy approach, which assumes tariffs are a tool for\nprotecting domestic industries.<\/p>\n
Based on data from the Peterson Institute for International\nEconomics, US inflation rates have so far fallen from a peak of 9.1%\n(2022) to around 3\u20133.5% (2025). The previous tariffs are estimated to\nhave added USD 800\u20131,200 per year to US household costs. However, tariff\nremoval has two consequences: positive, which could lower goods prices\nand increase consumption. Negative, it could spark pressure on domestic\nindustries (manufacturing belt).<\/p>\n
Economist Paul Krugman sees that protectionism is often more\npolitically nuanced than economically, but still has real distributional\neffects. Meanwhile, the US is now facing a classic dilemma: economic\nefficiency versus domestic political stability.<\/p>\n
Indonesia\u2019s Strategy: Maintaining Surplus, Pressing Deficit<\/p>\n
Indonesia faces two realities: a trade surplus with the US (around\nUSD 14\u201316 billion per year), and conversely, a structural deficit with\nChina (over USD 20 billion). Access to the US market is the main factor\nin the surplus, although the export structure (primary commodities and\nlight manufacturing) is more determining.<\/p>\n
Therefore, a strategic approach to these two realities is important\nto prioritise rational policies: first, accelerating export value\naddition by ramping up nickel downstreaming, which has proven to\nincrease exports of metal-based products. However, it needs to be\nexpanded to the electronics and EV supply chain sectors. Second,\nstrategic rebalancing towards China, where deficit pressure can be\nminimised if balanced with productive investments. On the other hand,\ndependence on raw material imports needs to be reduced. Third, promoting\nmore adaptive trade diplomacy by leveraging the tariff cancellation for\npenetration of textile, furniture, and footwear products into the US,\nwhich have long been flagship export products. However, this must be\naccompanied by strengthening non-US markets to mitigate risks from\nexposure due to adaptation to new markets.<\/p>\n
Nobel laureate economist Joseph Stiglitz emphasises that modern trade\nstrategies must be based on industrial policy, not merely\nliberalisation. Indonesia needs to avoid a reactive approach. This\nmomentum must be used for structural repositioning, not just chasing\nshort-term exports.<\/p>\n
If observed from a quantitative perspective, we can simulate the\nimpact of US tariff cancellation on Indonesia\u2019s GDP through the trade\nchannel. Simply put, Indonesia\u2019s exports to the US, averaging USD 28\u201330\nbillion per year, have a price elasticity ranging from \u22121.2 to \u22121.5\n(estimates from developing country trade literature). This means that a\n10% price drop due to tariff removal could potentially boost export\nvolume increases by around 12\u201315%.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/implications-of-us-tariff-cancellation-on-global-trade-rebalancing-1775883043", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }