No Retaliation Planned
Coordinating Economic Affairs Minister Airlangga Hartarto said in a statement that Indonesia would pursue diplomacy and negotiations to find mutually beneficial solutions after Trump announced sweeping global tariffs on Wednesday. “The approach was taken by considering the long-term interest of bilateral trade relation, as well as to maintain the investment climate and national economic stability,” Airlangga said, adding that Jakarta will support potentially impacted sectors, such as apparel and footwear industry. Trump’s tariff on Indonesia, one of six hard-hit Southeast Asian countries is set to take effect on Wednesday. The Indonesian government will gather inputs from businesses on Monday to help formulate strategy to address the US tariff, and will find ways to increase trade with European countries as an alternative to the US and China, Airlangga said. Jakarta said it would send a high-level delegation to the US for direct negotiations with the government. Indonesia posted a $16.8 billion trade surplus last year with the US, which was its third-biggest export destination, receiving shipments worth $26.3 billion in 2024, according to Indonesian government data. Indonesia’s main business lobby has backed Jakarta to negotiate better terms with Washington after US President Donald Trump imposed hefty tariffs on goods from the country.
The tariffs were just “an opening statement”, said Indonesian Chamber of Commerce and Industry (Kadin) chair Anindya Novyan Bakrie in a statement late Thursday. “This means the door for negotiation is still open. Intensive communication with the US government… is the right move.” (The Jakarta Post)
Seeking Protection From China
Local manufacturers have highlighted an urgent need for measures to protect the domestic market in anticipation of a potential influx of displaced imports as a result of US tariffs, especially following an unexpected downturn in demand over Idul Fitri.Businesses are urging the government to protect the domestic market, warning countries could target Indonesia as an export destination for their products that failed to enter the United States following President Donald Trump’s sweeping tariffs on trading partners. Manufacturing groups representing the textiles, electronics, footwear, furniture and handicraft sectors urged the government in a meeting on Monday to fast-track import regulations and safeguard measures. “America is China’s biggest export destination. When that closes, they’ll divert goods elsewhere, and Indonesia emerges as a target due to its large market size,” said Dharma Surjaputra, deputy chair of the Electronics Producers Association (Gabel), as quoted by Kontan.co.id.
Prabowo Orders Reduction of Trade Barriers
President Prabowo Subianto has ordered the government to extensively cut back business regulations, including local content requirements and import restrictions, a day before the United States is set to slap steep import tariffs on Indonesian goods. Speaking at a public economic forum on Tuesday, the President said he had made it his “mission” to deregulate the economy and eliminate “convoluted” business bureaucracy. “Throw away all the regulations that don’t make sense. Make it easy! Make business processes easy!” Prabowo said in front of government officials, businesspeople, economists and journalists. Specifically, he vowed to make the regulation on local content requirements (TKDN) “more flexible” because it “ends up making us less competitive”. Another concrete instruction by the President was to eliminate quotas issued by the government for specific parties to import certain amounts of commodities, such as staple foodstuffs. “[So that] anyone who wants to import beef, they can do so. Whatever anyone wants to import, [let them] go ahead, open it [the market]. Our people are smart,” said Prabowo. If the deficit was a problem [for the US], then Indonesia would buy US$18 billion worth of US products, Prabowo said: “We’re not a poor country, we can buy” that much. He mentioned wheat, soybean and cotton as products Indonesia could import more of from the US, alongside liquefied petroleum gas, oil and oil drilling machines, given that the government was looking to revive 10,000 oil and gas wells. (The Jakarta Post)
Inflation Up Since December, Still Low
Indonesia’s consumer price index (CPI) in March had risen to its highest reading since December last year after the government ended the electricity discount that had subdued prices for the past two months along with a seasonal push from the Idul Fitri holiday. The country’s headline inflation hovered at 1.03 percent year-on-year (yoy) in March, Statistics Indonesia (BPS) production undersecretary M. Habibullah said in a press conference on Tuesday, while also noting that the monthly inflation reading in March had increased by 1.65 percent. The figure indicates a rebound in the price index after a decline of 0.09 percent in February and an increase of just 0.76 percent in January, with the former marking the first annual deflation in 25 years and the latter marking the lowest inflation rate since January 2000.
Rupiah Drops to New Low
Bank Indonesia (BI) has vowed to “intervene aggressively” in the domestic market after the rupiah plunged to another new multi-year low on Monday, following United States President Donald Trump’s sweeping tariff plans that hammered global financial markets. The rupiah traded at Rp 17,217 per dollar momentarily before it rebounded to around Rp 16,800 against the greenback on Monday, Bloomberg data shows. At one point on March 25, the rupiah also tumbled to Rp 16,642 per dollar, its weakest since the Asian Financial Crisis in 1998.