The Economic Consequences and Strategies of the US-China Trade War on Indonesia: A GTAP Simulation Analysis

Abstract

At present, the world economy is in uncertainty. One reason is that two economically large countries, the United States (US) and China are in conflict and beat the drums of trade war. 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 tariff. The aim of this study is to analyze the economic consequences of the USChina trade war for Indonesia and Indonesia's 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 of the US-China trade war on the found that trade wars between the US and China had an impact on the decline in the total output of goods produced by the US and China by 3.91% and 2.67% respectively. But the economic growth (PDB) of the US and China will be corrected by 0.08% and 0.66% respectively. Exports are still affected by -0.24% with greater implications. It means Indonesia has not been able to take advantage of the situation as a source of economic growth (GDP) projected to only increase by 0.01%. This means that Indonesia also needs to improve, so that investment in the real sector continues to flow profusely even though the China-US trade war has not been completed. The recommendation suggested that in the 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. In the longterm strategies include the need to improve the quality of human resources in the trade and industry sectors, utilization of the results of research and development, and infrastructure development is right on target for increased productivity. Keywords—economic impacts, strategies, US-China trade war, GTAP analysis