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December 12, 2024 | 03:04 pm
TEMPO.CO, Jakarta - Finance Minister Sri Mulyani warns of the impact of U.S. policies under Trump’s administration. Sri Mulyani anticipates similar policies, but the U.S. fiscal balance remains under scrutiny.
Republican candidate Trump will soon replace incumbent Joe Biden as the 47th U.S. president, starting his term on January 20. The president-elect vows to impose tighter restrictions on immigrants, boost fossil fuel production, and impose large tariffs on the U.S.'s largest trading partners. Trump's policies are feared to exacerbate the progress of a looming climate crisis and instigate a trade war.
"This situation will likely lead to increased tension,” said the minister on Wednesday, December 11, 2024.
Trump even threatened BRICS to refrain from creating a new currency or supporting currencies that will rival the U.S. dollar, lest he impose a 100 percent trade tariff on the bloc’s member countries.
BRICS is an acronym for Brazil, Russia, India, China, and South Africa, a bloc striving to challenge the West-dominated world order. The group started expanding its membership last year to Ethiopia, Iran, Egypt, Argentina, Saudi Arabia, and the United Arab Emirates (UAE).
Indonesia has also expressed a desire to join BRICS.
Aside from BRICS, Trump also promises high tariffs on the three largest trading partners of the U.S., namely Canada, Mexico, and China. He threatens to impose a 25 percent tariff on imports from Canada and Mexico and a 60 percent tariff on imports from China.
Sri Mulyani explained that trade tariffs become a proxy instrument in global political competition and tension. According to her, these will have a direct impact on the global economy. Especially since the U.S., impacted by Trump's policy, experiences a rising stock market but also rising deficits, debts, and bond yields.
"This affects the whole world. Inflation that was initially expected to decrease has the chance to rise yet again due to the rising prices. This will also cause restrained inflation in America," she said.
The former World Bank Managing Director said Indonesia's biggest challenge to anticipate is from its primary trading partners, namely the U.S. and China. The stock and asset prices in the U.S. are likely to rise under Trump, while China will be burdened with the 60 percent tariff promised by Trump.
According to her, Indonesia and the whole world must anticipate trade barriers, unstable commodity prices due to the shocks in the supply chain, and the strengthening of the U.S. dollar. "And we also have to anticipate pressure on capital flows that will return to the United States," she explained.
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