The recent tariff policies introduced by the Trump administration have significant implications for Indonesia’s trade dynamics, particularly concerning its exports to the United States. A proposed 32% tariff on Indonesian goods has prompted the Indonesian government to adopt a multifaceted strategy to mitigate potential adverse effects.​

Impact of U.S. Tariffs on Indonesia

  1. Trade Surplus Concerns: Indonesia maintains a substantial trade surplus with the U.S., amounting to $16.8 billion in 2024, with exports totaling $26.3 billion against $9.4 billion in imports. This surplus has made Indonesia a target for the U.S.’s tariff measures.​
  2. Sectoral Vulnerabilities: Key Indonesian exports such as textiles, garments, footwear, and palm oil are particularly susceptible to increased tariffs. These sectors are labor-intensive and play a crucial role in employment and economic stability. ​
  3. Comparative Disadvantages: Countries like Vietnam benefit from bilateral agreements with the U.S., exempting them from certain tariffs. Indonesia’s lack of a similar agreement places its exporters at a competitive disadvantage.

Indonesia’s Strategic Responses

  1. Enhancing U.S. Imports: To address the trade imbalance, Indonesia plans to increase imports from the U.S. by up to $19 billion, including approximately $10 billion in energy imports such as crude oil and liquefied petroleum gas (LPG). This strategy aims to reduce the trade surplus and avert the imposition of the proposed tariffs.
  2. Product Diversification: The government is encouraging exporters to diversify their product offerings, focusing on goods not produced in the U.S., to maintain export levels and mitigate the impact of tariffs.
  3. Pursuing Trade Agreements: Indonesia is actively seeking bilateral trade agreements, including a proposed free trade agreement (FTA) with the U.S., to secure more favorable trade terms and reduce tariff barriers.
  4. Attracting Relocated Industries: The government is positioning regions like Batam Island as attractive destinations for industries relocating from China to evade U.S. tariffs, offering incentives and leveraging special economic zones to attract investment. ​

Recommendations for Indonesian Exporters

  1. Market Diversification: Exporters should explore new markets in Asia, Africa, and Europe to reduce reliance on the U.S. market and mitigate risks associated with tariff changes.
  2. Supply Chain Resilience: Investing in domestic manufacturing and reducing dependence on imported raw materials can enhance resilience against external trade shocks. Companies like Gudang Garam have successfully adopted this approach. ​
  3. Engagement in Policy Dialogue: Active participation in discussions with government bodies can help shape policies that support exporters and address challenges arising from international trade dynamics.​
  4. Innovation and Value Addition: Focusing on innovation and adding value to products can enhance competitiveness in global markets, making exports more attractive despite tariff barriers.​

Conclusion

The imposition of new U.S. tariffs presents challenges for Indonesian exporters, but with strategic adjustments, diversification, and proactive engagement, these challenges can be transformed into opportunities for growth and resilience in the global market.

References

Antara News. (2025, April 18). Government protects labor-intensive industries following US tariffs. https://en.antaranews.com/news/351293/government-protects-labor-intensive-industries-following-us-tariffs

Antara News. (2025, April 3). RI urges export diversification as US tariff threat looms. https://en.antaranews.com/amp/news/343877/ri-urges-export-diversification-as-us-tariff-threat-looms

Business Indonesia. (2025, April). Indonesia proposes trade tariff reductions to the US through bilateral cooperation. https://business-indonesia.org/news/indonesia-proposes-trade-tariff-reductions-to-the-us-through-bilateral-cooperation

Open Privilege. (2025, April 18). Indonesia’s trade strategy in Trump’s tariff era. https://www.openprivilege.com/business/economy/indonesias-trade-strategy-in-trumps-tariff-era-679110dee6785fc64ee03815

Pongo Share. (2025, April). Indonesian exporters benefit from Trump tariffs. https://www.pongoshare.com/indonesian-exporters-benefit-trump-tariffs/

Reuters. (2025, April 15). Indonesia to propose lifting US oil, LPG imports by around $10 billion. https://www.reuters.com/business/energy/indonesia-propose-lifting-us-oil-lpg-imports-by-around-10-billion-2025-04-15/

Reuters. (2025, April 18). Indonesia says to increase US imports, lower orders from other countries. https://www.reuters.com/world/asia-pacific/indonesia-says-increase-us-imports-would-divert-orders-elsewhere-2025-04-18/

Straits Times. (2025, April). Indonesia seeks new deals as ‘shocking’ Trump tariffs roil trade. https://www.straitstimes.com/asia/se-asia/indonesia-seeks-new-deals-as-shocking-trump-tariffs-roil-trade

The Jakarta Post. (2025, January 21). Govt pitches RI for factories relocating from China to evade US tariffs. https://www.thejakartapost.com/business/2025/01/21/govt-pitches-ri-for-factories-relocating-from-china-to-evade-us-tariffs.html