Trump's trade protectionism and the vulnerability of Indonesia's export-oriented MSMEs

This study investigates the impact of the United States' tariff policy during the Trump era of trade protectionism on MSME-intensive export sectors in Indonesia using the Global Trade Analysis Project (GTAP) model. The analysis focuses on three sectoral proxies for MSME-intensive export sectors: wearing apparel, leather products, and wood products. Three simulation scenarios are used: a 10% US global tariff, a 19% specific tariff on Indonesia, and an escalation of the US-China trade war with a 30% tariff on Chinese products. The results indicate that global tariffs have a moderate negative impact on the Indonesian economy, while specific tariffs on Indonesia result in the largest contraction, especially in the wearing apparel and leather products sectors. Conversely, the US-China trade war creates opportunities for trade diversion that improve the performance of several export MSME sectors. These findings emphasize the importance of diversifying export markets and strengthening MSME competitiveness.