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The art of trade war: spurring investments in Indonesia amidst the US–China trade war


  • Jong, Hilda Yanuar


The US–China trade war creates significant opportunities for developing countries, as global manufacturers need to relocate their production facilities out of China to avoid future tariff hikes. However, Indonesia as the biggest economy in the ASEAN is not experiencing any substantial advantage relative to its neighbors, especially compared to Vietnam. While there is no clarity on how long the trade war will last, it is important for Indonesia to strategize quickly to capitalize the opportunities. This article addresses the question of how Indonesia should strategize through country comparison and analysis of two types of policy competition, namely, incentives-based (IBC) and rules-based competition (RBC). In the short-term, Indonesia should be more accommodating for investors of all sizes and maximize the trade-related investment assistance. In the longer term, Indonesia should prudently open up to trade, improve cooperation between investment and trade functions, and build a positive public mindset for free trade.

Suggested Citation

  • Jong, Hilda Yanuar, 2022. "The art of trade war: spurring investments in Indonesia amidst the US–China trade war," LSE Research Online Documents on Economics 114464, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:114464

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    References listed on IDEAS

    1. Li, Zhongmin, 2013. "How Foreign Direct Investment Promotes Development: The Case of the People’s Republic of China’s Inward and Outward FDI," ADB Economics Working Paper Series 304, Asian Development Bank.
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    More about this item


    FDI; free trade; Southeast Asia; strategy; trade war;
    All these keywords.

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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