Indonesia is preparing to impose tariffs and use other means to protect its textile industry from imports from China, the latest in a series of nations that are responding to the flood of goods out of the world’s largest manufacturing nation.

Local textile associations requested the government step in after imports surged, hurting their businesses. The trade safeguards committee is investigating the issue and once they report, the government will decide how to respond, Budi Santoso, the trade ministry’s director-general of foreign trade, said on Monday (July 1).

It’s unclear whether the government is considering imposing only safeguard duties or also other tariffs, but last Thursday, the head of fiscal policy at the finance ministry said that they were planning to bring back safeguard duties on some fabric products that had expired in November 2022. On Friday, Trade Minister Zulkifli Hasan said that Indonesia could impose up to 200% tariffs on imports to protect local industries from cheap goods from countries like China.

Southeast Asia’s largest economy has to balance the need to attract more foreign investment and trade from China and other countries while also ensuring local businesses remain competitive. China is the biggest source of imports and the largest customer for Indonesian exports, and a substantial increase in levies could prompt a reaction from Beijing and damage those ties.

Earlier this year, the government in Jakarta was forced to roll back some import restrictions which had led to shortages and a backlog of imports at ports. Now, protests from thousands of textile workers are pushing the government to introduce new curbs after the nation imported almost 29,000 tonnes of woven fabrics made from artificial filament yarn last year. Goods from China accounted for most of that.

“We have actually provided many fiscal instruments to protect the textile industry, including safeguard duties and anti-dumping duties, which are usually related to unfair trade that harms the domestic industry,” said Febrio Kacaribu, head of the fiscal policy agency at the finance ministry. The ministry would need to discuss with other ministries any other import duties, he added.

Indonesia has maintained an overall trade surplus for the last four years. However, the surplus with China flipped to a deficit in May, driven by imports of machinery and plastic goods.

  - Bloomberg