A researcher from the economic department of the Center for Strategic and International Studies pointed out that the main threat in current trade dynamics is not only high tariffs but also potential obstacles arising from allegations of Chinese transshipment. The US-China trade competition has shifted from tariff wars to reshaping global supply chains. The US not only restricts "Made in China" products but may also restrict "Created in China" products manufactured in factories in other countries, including Indonesia. Transshipment refers to Chinese goods being re-exported via third countries like Indonesia. For example, China uses Indonesia's free trade agreement with Australia to first ship goods to Indonesia and then export them to Australia to obtain lower tariffs, possibly even just relabeling them as "Made in Indonesia" without substantive processing that meets rules of origin, such as changing HS codes. The US may apply different tariff policies to Southeast Asian countries like Vietnam based on the US-Vietnam agreement. If it cannot be proven that transshipment has not occurred, tariffs could be as high as 40%, while countries that can prove compliance could see tariffs reduced to 20%, but proving the absence of transshipment is extremely difficult. Southeast Asian countries may be forced to build two independent supply chains (one for the US and one for China), leading to higher production costs, hindered exports, and slower industrial growth. Moreover, these countries are highly dependent on Chinese raw materials. For example, Indonesia's imports of raw materials from China account for 25%, and Vietnam and Cambodia have even higher dependence. The transshipment issue involves not only finished goods but may also extend to investment activities. Relevant countries need to prove that their supply chains do not contain Chinese raw materials to maintain low tariffs. Indonesia's main exports to the US, such as textiles, footwear, and palm oil, have significant demand in global markets (e.g., the EU). In 2023, the EU was the largest importer of 20 of Indonesia's major products. For example, the EU imported 48% of global Indonesian footwear products (HS 6403). At the same time, negotiations on the Indonesia-EU Comprehensive Economic Partnership Agreement should be accelerated and expanded to larger regions to avoid the risk of US tariff discrimination. While market diversification is feasible, raw material diversification is much more difficult because raw material imports remain highly concentrated in specific countries like China. Indonesia has included the transshipment issue in tariff negotiations with the US. A spokesperson for the Coordinating Ministry for Economic Affairs admitted that transshipment is a common practice in international trade and has become a substantive part of the negotiations, though it was not disclosed whether it has become an obstacle, stating it is a factor to be considered and calculated in the talks.
A researcher from the economic department of the Center for Strategic and International Studies pointed out that the main threat in current trade dynamics is not only high tariffs but also potential obstacles arising from allegations of Chinese transshipment. The US-China trade competition has shifted from tariff wars to reshaping global supply chains. The US not only restricts "Made in China" products but may also restrict "Created in China" products manufactured in factories in other countries, including Indonesia. Transshipment refers to Chinese goods being re-exported via third countries like Indonesia. For example, China uses Indonesia's free trade agreement with Australia to first ship goods to Indonesia and then export them to Australia to obtain lower tariffs, possibly even just relabeling them as "Made in Indonesia" without substantive processing that meets rules of origin, such as changing HS codes. The US may apply different tariff policies to Southeast Asian countries like Vietnam based on the US-Vietnam agreement. If it cannot be proven that transshipment has not occurred, tariffs could be as high as 40%, while countries that can prove compliance could see tariffs reduced to 20%, but proving the absence of transshipment is extremely difficult. Southeast Asian countries may be forced to build two independent supply chains (one for the US and one for China), leading to higher production costs, hindered exports, and slower industrial growth. Moreover, these countries are highly dependent on Chinese raw materials. For example, Indonesia's imports of raw materials from China account for 25%, and Vietnam and Cambodia have even higher dependence. The transshipment issue involves not only finished goods but may also extend to investment activities. Relevant countries need to prove that their supply chains do not contain Chinese raw materials to maintain low tariffs. Indonesia's main exports to the US, such as textiles, footwear, and palm oil, have significant demand in global markets (e.g., the EU). In 2023, the EU was the largest importer of 20 of Indonesia's major products. For example, the EU imported 48% of global Indonesian footwear products (HS 6403). At the same time, negotiations on the Indonesia-EU Comprehensive Economic Partnership Agreement should be accelerated and expanded to larger regions to avoid the risk of US tariff discrimination. While market diversification is feasible, raw material diversification is much more difficult because raw material imports remain highly concentrated in specific countries like China. Indonesia has included the transshipment issue in tariff negotiations with the US. A spokesperson for the Coordinating Ministry for Economic Affairs admitted that transshipment is a common practice in international trade and has become a substantive part of the negotiations, though it was not disclosed whether it has become an obstacle, stating it is a factor to be considered and calculated in the talks.