The Trump tariff impact looms large over Indonesia’s export-driven economy as the U.S. prepares to implement a 32% reciprocal import tariff on Indonesian goods.
Bambang Soesatyo (Bamsoet), Vice Chairman of the Indonesian Chamber of Commerce and Industry (KADIN) for Politics and Security, warns that this policy could severely disrupt key sectors and test the resilience of the nation’s economic foundation.
“Trump’s policy is a fundamental resilience test for Indonesia’s economy, which still heavily relies on exports and global supply chains,” Bamsoet stated during a KADIN meeting in Jakarta on May 22, 2025 as reported by Detik.com.
Rising Concerns Over Trump Tariff Impact
The proposed tariff places a heavy burden on Indonesia’s manufacturing exports. Products such as textiles, footwear, and electronics, which collectively generated $3.59 billion in export value to the U.S., now face declining competitiveness due to price increases. Bamsoet noted that the textile industry, employing nearly 3.98 million workers, could lose up to 49% of its U.S. market share.
Strategic commodities like crude palm oil (CPO) and nickel, heavily exported to China, also face uncertainty. China, which accounts for 32% of Indonesia’s total exports, may reduce demand due to the fallout from the U.S.-China trade tensions. This double impact threatens Indonesia’s economic stability on multiple fronts.
Read More: Trump Imposes 32% Tariff on Indonesia, Economy at Risk?
Export and Employment Risks Intensify
The economic fallout extends beyond trade. Layoffs have surged, particularly in labor-intensive industries. Since early 2025, more than 24,000 workers have lost their jobs. Bamsoet warned of a potential spike in open unemployment to 4.75% and a rise in the poverty rate to 8.8% this year.
“The looming socio-economic threats are equally severe. A wave of layoffs is expected to hit labor-intensive sectors,” he said, underscoring the urgency of government intervention.
The decline in exports also risks weakening household consumption, a key driver of Indonesia’s gross domestic product (GDP). Economic slowdown could further strain public services and social welfare programs.
Broader Economic Fallout
The Trump tariff impact could ripple through Indonesia’s financial markets. Analysts fear that the rupiah may weaken beyond IDR 17,000 per U.S. dollar due to capital outflows. In a worst-case scenario, it could even hit IDR 18,000.
“Macroeconomic projections also paint a bleak picture. The World Bank estimates that a 1% drop in exports to the U.S. could reduce Indonesia’s GDP growth by 0.1%,” Bamsoet explained. Bank Indonesia expects GDP growth in 2025 to hover between 4.3% and 4.7% under negative conditions.
The Jakarta Composite Index (IHSG) may also suffer a 10-15% decline in the first half of 2025, with commodity and property sectors facing the steepest losses. Meanwhile, foreign debt, which already reached $427.5 billion or IDR 6,997 trillion by January 2025, will become harder to manage if the rupiah continues to depreciate.
Read More: Indonesia’s “Special Team” to Negotiate Lower US Import Tariffs
Government and KADIN Strategy Amid Tariff Impact
To counter the Trump tariff impact, KADIN and the Indonesian government are deploying a multi-pronged strategy. One key measure includes promoting industrial relocation from China to green industrial zones in Kalimantan and Java. These zones aim to support growth in the automotive and pharmaceutical sectors.
“Through aggressive economic diplomacy, smart market diversification, and strong domestic policy reinforcement, Indonesia is expected to mitigate the negative impacts and even seize new opportunities,” Bamsoet emphasized.
The government also plans to boost domestic consumption through free nutritious meal programs and village cooperative empowerment. A dedicated budget of IDR 120 trillion supports MSME digitalization, aiming to enhance competitiveness for 64 million small business actors in the digital economy.
KADIN recommends strengthening ASEAN diplomacy to enhance collective bargaining in U.S. negotiations, enforcing local content rules, and tightening anti-dumping policies. Investment in human capital and expanded cooperation with BRICS+ are also crucial to reduce dependence on the U.S. market.
New Opportunities Through Global Supply Chain Shift
Despite mounting challenges, Indonesia sees a chance to reposition itself in global supply chains. The shifting landscape caused by protectionist policies may open doors for Indonesia to attract more foreign investment and develop strategic industries.
By acting swiftly and strategically, Indonesia can turn adversity into opportunity and safeguard its economic future in an increasingly complex global trade environment
Source: finance.detik.com
Image: Getty Images
