US tariff talks: Scepticism over Indonesia's bid to use rare earths as bargaining chip

Experts do not expect much progress given American political, domestic considerations

- Wahyudi Soeriaatmadja

JAKARTA - Even as Indonesia's lead negotiator intensified lobbying efforts for a lowering of America's reciprocal tariffs this week, analysts remain sceptical that talks will make headway even if Jakarta attempts to leverage the nation's rich mineral resources as a bargaining chip.

They said the US' apparently adamant rejections of Indonesia's proposals to balance trade were politically motivated, hence any offers, even ones offering economic benefits, will not make it budge.

Still, plans to meet with members of the Trump administration in Washington this week went on, with Coordinating Minister for Economic Affairs Airlangga Hartarto pressing on with negotiation meetings hours after a July 7 letter issued by US President Donald Trump left Indonesia's tariff rate unchanged at 32 per cent.

In a text reply to The Straits Times on the night of July 7, Mr Airlangga hinted that Indonesia would continue dialogue up to Aug 1, the latest tariff deadline set by the US. He did not elaborate.

Indonesia has offered to cut tariffs on US imports to near zero, especially for agricultural and industrial products, committed to buying US aircraft, procuring energy commodities such as natural gas, and opening up to the US investment opportunities in nickel and copper smelting. These proposals have not gone anywhere.

Analysts do not expect much to come out of the ongoing talks, given that there are other American political and domestic considerations.

Analyst Henry Pranoto said the tariff rates for Indonesia are largely motivated by Mr Trump's plan to bring manufacturing jobs back to the US.

"The higher tariffs are meant to offset the gap in the minimum wages between the US and developing countries," said Mr Henry, who works at a Jakarta-based investment bank.