7 August 2025 (closed)
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Facing Trump’s ‘America First’ Protectionist Policy: Indonesia Limits Damage via Negotiations
Since his return into the White House, US President Donald Trump has made a series of decisions and expressed a number of threats that have the potential for disrupting Indonesia’s trade performance, and thus undermining Indonesia’s economic growth.
First, Trump announced a baseline 10 percent retaliatory US import tariff on almost all countries, including Indonesia, on 2 April 2025 (a tariff that came into effect three days later). Secondly – and also on 2 April 2025 – Trump announced country-specific reciprocal tariffs for 57 countries (those with which the US runs large trade deficits). In the case of Indonesia, this would involve a 32 percent US import tariff, slapped on all incoming goods from Indonesia. Initially, this steep tariff was to be imposed on 1 August 2025. However, Trump decided to pause its implementation in order to allow for a 90-day negotiation period.
Third, in July 2025 Trump threatened BRICS members, which includes Indonesia, as well as any (other) country “aligning themselves with the Anti-American policies of BRICS” to face an additional 10 percent in US import tariffs.
All tariffs mentioned above are part of Trump's protectionist agenda called "America First". By imposing substantial tariffs on imported goods, his administration aims to revitalize domestic manufacturing, protect national security by reducing reliance on foreign supply chains (especially China), and decrease trade deficits, which he views as harmful. This strategy seeks to encourage companies to produce goods within the US, create jobs and strengthen the American economy. Moreover, it is also likely that Trump uses tariffs as leverage in trade negotiations: by first announcing a very steep tariff, he puts himself in a strong position and encourages other countries to engage in negotiations.
However, critics warn of higher consumer prices, disrupted global supply chains and the potential retaliatory tariffs from other nations. This would then undermine US economic growth. It remains to be seen which side is right. In this article we take a look at how Indonesia addressed Trump’s recent import tariff threats.
Soon after Trump’s announcement in early April 2025, Indonesia’s cabinet decided to send a (high-profile) negotiation team to the US, led by Coordinating Minister for Economic Affairs Airlangga Hartarto, in an effort to limit the damage done on trade by presenting some interesting offers to the US. So, whatever the outcome, one can argue that this already proved that Trump’s tactic is a success as he is bound to gain something (albeit on the long term it could impact negatively on the US economy).
Reciprocal Tariffs for 57 Countries
The main reason why a delegation was sent to the US was the threat of seeing a major hiccup occurring in Indonesia’s export performance if a 32 percent tariff were to be imposed by Trump per 1 August 2025. Therefore, based on statements in Indonesian media, the main goal of Indonesia’s negotiation team was to safeguard the welfare of Indonesian workers in those sectors that are closely linked to Indonesia-US trade.
US tariffs mean that products become more expensive on the US market (unless the Indonesian exporter is willing to carry the burden), which –in theory– should curtail demand for the imported goods, which then could encourage a slowdown in export-oriented manufacturing.
However, there is also a chance of a positive scenario unfolding for Indonesia amid this ‘tariff bonanza’, because if domestic production in the US is insufficient for an export product of Indonesia, while competitors that manufacture the same product face higher US tariffs, then Indonesia gains competitiveness on the US market. And so, US importers who traditionally imported from other countries could even decide to turn to Indonesia instead for their import needs. Table 1 reveals that Indonesia’s 19 percent tariff is not the worst. For example, China, Vietnam and Malaysia face the threat of seeing higher tariffs in case negotiations with the US fail. Indonesia would then enjoy a net advantage in terms of US import tariffs.
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