Palm oil worker harvesting palm oil

Indonesia’s Incoming Trade War: 5 Geopolitical Effects You Need to Know

1. Indonesia’s fight with the EU could create trade war

Indonesia announced today that it will immediately recommend to an inter-ministerial team a 20%-25% tariff on EU dairy products as the appropriate response to the EU’s plan to impose anti-subsidy duties of 8%-18% on palm biodiesel from Indonesia. This seems the spark to a trade war between Indonesia and the EU, but there are feelings that Indonesia’s industry would get hurt the most, as the EU duties would be another blow to Indonesian biodiesel producers after the 28-nation block said in March that palm oil should be phased out of renewable transportation fuels due to palm plantations’ contribution to deforestation. “If the parameters are not fair, it’s a step toward protectionism and a trade war, and we will not stay silent for the unfair treatment,” Enggartiasto Lukita told an economic forum in Jakarta. It remains to be seen whether Jakarta will back down or not.

2. Effects of EU sanctions already visible

The effects of the Eu’s tariffs on Indonesia can already be seen, as the EU ban on palm oil could keep Norwegian telecommunication giant Telenor Group out of Indonesia. The EU parliament passed on 10 June 2019 a law that will restrict and ban palm oil usage in biofuel by 2030. Since Telenor originates from the EU, the merger should be scrutinised, according to Indonesia’s Minister of Communication and Information Technology, Rudiantara. Nevertheless, the exclusion of an important company from Indonesian operation signifies that Indonesia will suffer economically from the incoming trade war.

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3. Trade co-operation with Malaysia booming

4. Vietnam crucial partner

5. Indonesia facing tax from China as well

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