TEMPO.CO, Jakarta - Bhima Yudhistira, Executive Director of the Center for Economic and Law Studies (Celios), commented on the United States' reciprocal tariff policy on Indonesia, which stands at 32 percent.
"This could lead to a recession in Indonesia’s economy by the fourth quarter of 2025," Bhima stated when reached in Jakarta on Thursday, April 3, 2025, as reported by Antara.
Bhima explained that the tariff hike announced by US President Donald Trump would severely impact the Indonesian economy. He noted that it would not only reduce the volume of Indonesian exports to the United States, but could also have a prolonged negative effect on exports to other countries.
With this reciprocal tariff, Bhima stated that the Indonesian automotive and electronics sectors would be at the brink. This is because U.S. consumers bear the tariff with higher vehicle purchase prices, leading to a decline in motor vehicle sales in the US.
Due to the 1 percent economic growth decrease in the U.S., there would be a 0.08 percent decline in the Indonesian economy, according to him.
"Indonesian automotive producers cannot easily shift to the domestic market, as the exported vehicle specifications differ. The impact would be layoffs and a decrease in production capacity for all domestic automotive industries," said Bhima.
In addition to the automotive and electronic sectors, Bhima estimated that labor-intensive industries such as ready-to-wear clothing and textiles would also decline. This is because many U.S. global brands have a large market share in Indonesia.
"Once subjected to higher tariffs, those brands will reduce their orders to Indonesian factories. Meanwhile, domestically, we will be flooded with products from Vietnam, Cambodia, and China, as they target alternative markets," Bhima said.
Bhima encouraged the government to explore opportunities for relocating factories by ensuring consistent regulations, streamlining licensing processes, improving infrastructure in industrial areas, securing sufficient renewable energy sources to power industries, and enhancing the preparedness of the workforce.
It was reported that on Wednesday, April 2, 2025, President Donald Trump announced a minimum 10 percent tariff increase on goods from many countries worldwide, including Indonesia, entering the U.S.
A post from the White House on Instagram revealed that Indonesia is ranked eighth on the list of countries affected by the U.S. tariff hike, with a rate of 32 percent. Approximately 60 countries will face reciprocal tariffs, set at half the rate they impose on the U.S.
The list also shows that Indonesia is not the only Southeast Asian nation impacted by the U.S. trade policy. Other countries in the region, including Malaysia, Cambodia, Vietnam, and Thailand, will face tariff increases of 24 percent, 49 percent, 46 percent, and 36 percent, respectively.
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