The 32% tariff on Indonesia, recently announced by former U.S. President Donald Trump, has sparked concerns about the stability of Indonesia’s trade and economy.
Trump’s move to label Indonesia as a trade violator is part of his renewed campaign focus on protectionism and American manufacturing. The sharp increase in duties could significantly disrupt Indonesia’s export market, especially in key sectors like textiles and rubber.
A Longstanding Trade Partnership
Indonesia and the United States have maintained strong trade relations for decades. In 2023, bilateral trade between both countries reached nearly US$40 billion.
The U.S. remains one of Indonesia’s largest export destinations, with key shipments including footwear, garments, rubber, and electrical machinery. Despite this, Trump argues that trade deals with countries like Indonesia disadvantage American workers.
Reasons Behind the 32% Tariff on Indonesia
Trump’s rationale for imposing the 32% tariff on Indonesia centers on what he describes as unfair trade practices. He accuses countries like Indonesia of “destroying the American middle class” through policies that undercut U.S. manufacturers.
Speaking at a campaign rally, Trump stated, “We will place a 60% tariff on all Chinese imports, and tariffs will also be placed on foreign cars, steel, and other products, including a 32% tariff on Indonesia, which is a violator.” This declaration signals a strong shift back to the aggressive trade policies seen during his first term.
Impact on Indonesia’s Key Export Industries
The tariff directly targets sectors that play a crucial role in Indonesia’s export economy. Industries such as textiles, footwear, and rubber products are among the most vulnerable.
These goods make up a large share of Indonesian exports to the U.S., and higher import duties could lead to reduced competitiveness. Industry experts warn that companies may experience shrinking profit margins and potential job losses if buyers turn to alternative suppliers in other low-cost countries.
Is Indonesia’s Economy at Risk?
Economists suggest that the tariff could have broader implications beyond individual sectors. If exports to the U.S. decline, Indonesia may see a drop in foreign exchange earnings and weakened investor confidence. Additionally, the move could strain the country’s trade balance and slow overall economic growth.
While Indonesia has shown resilience during past global trade tensions, a targeted tariff at this scale could increase pressure on the nation’s fiscal and monetary policy frameworks.
How Indonesia Plans to Address the 32% Tariff
In response to the announcement, Indonesia’s government has begun assessing potential countermeasures. Coordinating Minister for Economic Affairs Airlangga Hartarto emphasized the need for strategic evaluation, stating, “We are examining and evaluating the policy so that we can make the best decision for the Indonesian economy.” as reported by Kompas.com. The Ministry of Trade is also expected to consider bringing the issue to the World Trade Organization (WTO), citing the importance of multilateral rules in resolving trade disputes.
Beyond trade assessments, Indonesia is also preparing a diplomatic response. The Ministry of Foreign Affairs may engage with U.S. officials through formal channels to seek clarification and promote dialogue. Indonesian diplomats are expected to coordinate with trade allies and international bodies to ensure that any action taken aligns with global trade norms. This dual-track strategy; combining legal mechanisms with diplomacy reflects Indonesia’s commitment to protecting its economic interests while upholding international cooperation.
Meanwhile, local exporters are being urged to explore new markets and boost product competitiveness to reduce dependence on the U.S. market. Diversification and innovation are likely to become central to Indonesia’s longer-term trade resilience strategy.
Navigating Trade Friction Ahead
Trump’s imposition of a 32% tariff on Indonesia may mark the beginning of a new phase of economic friction between the two nations. With major export sectors at risk and macroeconomic stability potentially affected, Indonesia must navigate the challenge with calculated diplomacy and strategic adaptation. Businesses and policymakers will need to stay alert to evolving developments and plan accordingly to mitigate any long-term damage.
Source: kompas.com
Image: Chip Somodevilla/Getty Images
