US tariffs: A Measured Perspective

Former Indonesian Vice President Jusuf Kalla has offered a tempered assessment of the impact of US tariffs, suggesting that their effect on Indonesian manufacturing may be less severe than initially feared. kalla’s analysis focuses on the specific economics of export pricing and the potential absorption of tariff costs by US consumers and businesses.

The Economics of Export Tariffs: A Breakdown

Kalla argues that the imposition of a 32% tariff by the US does not necessarily translate to widespread layoffs within the Indonesian manufacturing sector. He illustrates this point with the example of shoe exports. He stated that while the export price of shoes from Indonesia to the US might range from $15 to $20, the final retail price in the US could be between $50 and $70. The tariff,applied to the export price,would amount to approximately $6.40.

So, if this is 32%, it means 6 dollars 40 cents are the tariff. So how much is it here? Only 10% of the effect.
Jusuf Kalla, Former Vice President of Indonesia

This, according to Kalla, represents only about 10% of the final selling price, a manageable impact that doesn’t necessarily warrant drastic measures like workforce reductions.

Who Bears the Burden? Consumers and US Businesses

Kalla contends that the burden of these tariffs is primarily borne by American consumers and businesses. He suggests that US entrepreneurs, keen to maintain sales volumes, will likely seek efficiencies within their operations to absorb the tariff costs.

Who pays 10%? Of course the one who pays for entrepreneurs and American consumers.
Jusuf Kalla, Former Vice President of Indonesia

This could involve measures such as reducing advertising expenditure or streamlining internal processes to offset the additional expense. This aligns with economic principles where tariffs frequently enough lead to higher prices for consumers and reduced profits for businesses importing goods.

Rupiah’s Weakening: A Silver Lining?

Kalla also points to the weakening of the Indonesian Rupiah against the US dollar as a potential mitigating factor. A weaker Rupiah can make Indonesian exports more competitive, possibly offsetting some of the negative effects of the tariffs. This currency dynamic provides a buffer for Indonesian businesses, allowing them to maintain profitability even with the added tariff burden.

Strategic Maneuvering: Tariffs as a Negotiation Tactic

kalla views the imposition of tariffs as a strategic move by the US government to initiate trade negotiations. He suggests that the high tariffs are a form of pressure, designed to encourage dialog and potentially lead to more favorable trade agreements. This perspective aligns with the understanding of tariffs as a tool used in international trade relations to gain leverage in negotiations.

Actually this is a pressure for negotiations. I get buying something. first give a high price,then negotiate. So these are the pressure numbers.
Jusuf Kalla, Former Vice President of Indonesia

Long-Term Viability: The Cost of Manufacturing in the US

Kalla questions the long-term viability of relocating manufacturing operations to the US, citing the higher costs associated with building factories and employing workers compared to Asian countries. He suggests that these cost differentials could serve as a bargaining chip for Indonesia in future trade discussions. The economic realities of manufacturing costs provide a strong incentive for businesses to maintain production in regions where labor and infrastructure are more affordable.

Sudden Tariff Announcement Shakes Markets

In a move that has sent ripples through both the automotive and pharmaceutical industries, former President Trump has swiftly declared new tariffs impacting a wide range of goods, from cars to pharmaceuticals. The announcement, captured in a recently surfaced video, has ignited discussions about the potential economic ramifications and strategic motivations behind this decision.

Impact on the Automotive Industry

The automotive sector, already grappling with supply chain disruptions and the transition to electric vehicles, faces further uncertainty. Tariffs on imported car parts and vehicles could lead to increased production costs and potentially higher prices for consumers. This could disproportionately affect smaller manufacturers and those reliant on international supply chains.According to a recent report by the Automotive Trade Association, tariffs could increase the average car price by as much as 15%, potentially dampening sales and impacting jobs.

“These tariffs will undoubtedly create headwinds for the automotive industry, potentially slowing down innovation and hindering our ability to compete globally.”

Automotive Trade Association Report, 2025

Pharmaceuticals Under Pressure

The inclusion of pharmaceuticals in the tariff announcement has raised concerns about access to affordable medications. Tariffs on imported drugs and active pharmaceutical ingredients (APIs) could drive up the cost of prescription drugs, impacting patients and healthcare providers alike. This is notably concerning given the ongoing debate about drug pricing and affordability in the United States. Such as, a recent study by the Kaiser Family Foundation found that nearly one in four Americans struggle to afford their prescription medications.

The potential impact on patients is deeply concerning. Increased drug costs could force individuals to make challenging choices about their health.

Dr. Emily Carter, Health Policy Analyst

Economic and Political Implications

The motivations behind this sudden tariff announcement remain a subject of speculation. Some analysts suggest it could be a strategic move to bolster domestic manufacturing and reduce reliance on foreign suppliers. Others view it as a political maneuver aimed at appealing to specific voter demographics. Regardless of the underlying reasons, the announcement has undoubtedly injected a new level of uncertainty into the economic landscape.