Donald Trump, the President of the United States, imposed tariffs on China during his first term to balance U.S.-China trade and bring manufacturing jobs back to the United States, a policy maintained by the Joe Biden administration. Subsequently, Chinese manufacturers sought alternative markets to replace the U.S. market, with some starting production in other countries to avoid tariffs. In addition, during Trump's second term, he increased tariffs on China. This means that Chinese exporters must again find markets to replace the orders they previously received from the U.S., leading to a flood of Chinese goods worldwide and already impacting jobs in developing countries like Indonesia.
According to the Indonesian Textile and Yarn Producers Association, about 250,000 jobs in Indonesia's textile and clothing industry, the largest economy in Southeast Asia, have disappeared over the past two years. It is estimated that 500,000 jobs will be at risk by 2025. Within a few years, 25% of jobs in the textile and clothing industry have vanished, a rate faster than the 'China shock' that took away 2.4 million U.S. jobs from 1999 to 2011. Gordon Hanson, a professor of urban policy at Harvard Kennedy School, noted on the 26th (local time) to Bloomberg, "This is China shock 2.0 or China shock 3.0. China has immense manufacturing capabilities, and the goods need to go somewhere."
As evidence of this, dozens of textile factories for clothing near Surakarta on Java Island in Indonesia have closed. Hariyanto, who worked at a factory for over 30 years, said to Bloomberg, "It's because of the cheap imports from China." Last year, 1,500 employees at this factory were put on unpaid leave, and the workers are engaged in a legal battle with the company over unpaid wages and severance pay.
According to a survey by Bloomberg Economics, China's share of U.S. imports has significantly decreased since Trump's first term, while its global export share has remained nearly the same. Emerging countries have greatly increased their purchases of Chinese products since 2017, leading to record trade surpluses in manufactured goods. Much of this includes finished goods like mobile phones, clothing, and home appliances from China. However, there has also been a sharp increase in imports of parts and materials used by factories that produce goods for export to the U.S. Bloomberg interprets this as "evidence that the tariffs imposed by Trump triggered changes in global supply chains."
Governments around the world have begun to devise response measures. Thailand introduced a plan to address the surge in Chinese goods, including electronics and clothing. Last year, Thailand imposed a 7% value-added tax on imports under $50 to mitigate the influence of the Chinese e-commerce firm Temu. Malaysia charged a 10% sales tax on low-priced products purchased online last year. India implemented various measures, including anti-dumping investigations on solar cells, aluminum, and mobile phone parts from China. The Vietnamese government ordered Temu to cease operations in Vietnam last year due to incomplete business and tax registration documents.
However, it is not practically easy for Southeast Asian countries to introduce a policy that completely blocks imports from China. China is the largest trading partner for these countries and invests in power plants, high-speed railways, and other infrastructure projects. Reflecting this, Southeast Asia is adopting policies that provide subsidies to producers struggling with problems related to Chinese imports instead of erecting trade barriers. For example, the Indonesian government has been reluctant to criticize China, despite job losses in the clothing sector, as China accounts for 25% of Indonesia's total trade and has helped in the construction of high-speed rail. Deborah Elms, the trade policy director at the Hinrich Foundation, pointed out, "You can't complain about a country that builds your ports selling shoes."