The Trump's Tariff

The sources provide an extensive overview of Indonesia's economic response to the global trade uncertainty triggered by US President Donald Trump's new reciprocal tariffs, which initially levied a 32% duty on Indonesian goods but were later negotiated down to 19% or temporarily delayed. These policies have prompted Indonesia to pursue high-level diplomatic negotiations with the US, aiming for a 0% tariff on strategic commodities while simultaneously seeking to diversify export markets away from traditional partners like the US and China, with a focus on agreements like the I-EU CEPA and RCEP. Domestically, there is a strong call from business associations like Apindo for accelerated structural reforms, including regulatory streamlining and strengthening domestic industry, to mitigate the negative impacts on national competitiveness, investment, and the potential for mass layoffs. Furthermore, the texts discuss Indonesia's efforts to navigate the US-China trade war by maintaining a neutral stance and leveraging its own resources, such as through the strategic downstreaming of mineral commodities. Finally, the uncertainty surrounding global trade and geopolitics has led to volatility in Indonesian financial markets, with fluctuations in the stock market and increased investor interest in safe-haven assets like gold.

Navigating the New Normal: How Diplomacy Eased Indonesia’s Tariff Crisis, But Why Vigilance Remains Key

The past few months have been defined by renewed global trade upheaval, largely stemming from the aggressive tariff policies initiated by the United States under President Donald Trump. While Indonesia recently secured a significant reduction in the threatened US tariffs, experts emphasize that this moment calls not for celebration, but for rigorous structural reform and strategic diversification.

Let's break down the core events and implications of this geopolitical challenge using the 5W1H framework:

The 5W1H Analysis: Indonesia and the Trump Tariffs

WHO: The Key Players

The central figure initiating this global trade disruption is US President Donald Trump, whose administration pursued a protectionist policy under the banner of "Make America Great Again" (MAGA). This policy targeted major economies like China (initially facing tariffs up to 145%), as well as key partners like Mexico and Canada.

For Indonesia, the key responders included President Prabowo Subianto and the negotiating team led by Coordinating Economic Minister Airlangga Hartarto.

The Indonesian sectors most acutely affected are the labor-intensive export industries—specifically textiles and apparel (TPT), footwear, and furniture—which rely heavily on the US market. Trade experts warned that failure in negotiations could trigger mass layoffs, potentially impacting between 500,000 workers (textile industry estimate) and up to 2 million people (Indef estimate).

WHAT: The Policy and the Outcome

The core event was the imposition of "reciprocal tariffs" by the US administration.

• Initial Threat: On April 2, 2025, the US announced a base tariff of 10% on imports from almost all countries, including Indonesia. Indonesia was initially threatened with a steep 32% reciprocal tariff.

• The Negotiated Rate: Following intense diplomatic efforts, including a temporary suspension period, President Trump ultimately agreed in mid-July 2025 to impose a significantly reduced tariff of 19% on most Indonesian products entering the US market.

• The Context: This 19% rate is currently the lowest secured by a country in Southeast Asia, providing Indonesia with a competitive advantage over rivals like Vietnam (20% tariff) and Malaysia (25% tariff).

WHEN: A Timeline of Tension and Negotiation

The global trade tensions escalated rapidly following President Trump's inauguration on January 20, 2025.

• Early April 2025: Trump announced the sweeping tariffs, causing the IHSG (Jakarta Composite Index) to plummet sharply, including a 7.9% drop on April 8, 2025.

• April - May 2025: Indonesia dispatched a high-ranking delegation to Washington D.C. for negotiations, offering concessions and structural reform proposals.

• July 2025: The temporary period of tariff suspension ended, culminating in Trump's decision to lower Indonesia's tariff rate to 19%.

WHERE: Global Chessboard

While Washington D.C. was the center of the negotiation, the impacts were felt globally.

• Indonesia: Focused on domestic consolidation and diplomacy.

• BRICS: Indonesia formally joined the BRICS group (Brazil, Russia, India, China, South Africa) in July 2025, seeking to strengthen ties with the Global South and diversify market reliance away from the US.

• Global Markets: International agreements (like the US-China temporary tariff reduction in May 2025) and escalating geopolitics (like the Israel-Iran conflict in June 2025) continued to fuel instability in stock markets, prompting investors to seek safe-haven assets like gold.

WHY: Underlying Motivations

Trump's tariff blitz was motivated by a desire to address the large US trade deficit (which hit $1.2 trillion in 2024) and pressure trade partners into altering domestic policies considered harmful to US businesses.

Indonesia's negotiation efforts were driven by the urgent need to protect its vital export sectors (like textiles and footwear) and avert mass job losses. Furthermore, diplomacy was deemed the appropriate strategy, as retaliation was considered unwise due to Indonesia's national capacity and potential risks.

HOW: Strategy and Tactics

Indonesia employed a multi-pronged diplomatic and economic strategy to mitigate the tariffs:

1. Concessions: Indonesia offered various reciprocal actions, including committing to purchase more US products (such as energy, agricultural products, and military equipment) totaling around 18−19 billion, aimed at reducing the trade deficit disparity.

2. Deregulation: Jakarta offered to relax certain Non-Tariff Measures (NTMs), such as simplifying import licensing and easing Local Content Requirements (TKDN), particularly in the ICT sector for US companies like Apple and Microsoft.

3. Structural Reform: Experts stress the urgency of consistent structural reforms, improving industrial competitiveness, strengthening the domestic market, and diversifying export destinations beyond reliance on one nation.

4. Mitigation Planning: The government prepared by establishing a Task Force for Mass Layoffs (Satgas PHK) to proactively address job losses resulting from the global trade pressures.

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The Road Ahead: Beyond the 19% Rate

While the 19% tariff represents a successful tactical win for Indonesian diplomacy, policymakers and businesses must heed warnings that the work is far from complete.

The US negotiation strategy often involves creating uncertainty to force concessions, and the deal secured risks "ruffling feathers" among other key trade partners who may now demand similar zero-tariff access afforded to the EU, or eased local content rules provided to the US.

Ultimately, the consensus among experts is clear: Indonesia must prioritize building economic resilience at home. This involves accelerating productive government spending, focusing on strengthening domestic purchasing power, improving the investment climate through legal certainty, and enhancing industrial competitiveness. The ability of the Indonesian economy to stand on its own feet remains the strongest long-term defense against unpredictable global policy shocks.