Impact of Trump's Tariff Policy to Indonesia: Blessing in Disguise

By: Fahmi Wibawa, Executive Director of LP3ES, Lecturer and Economist at FEB UIN Syarif Hidayatullah.

While much of the world was enjoying the Eid al-Fitr holiday, U.S. President Donald Trump “stole” global attention by officially announcing reciprocal tariffs on imported commodities entering the United States. Contrary to expectations, the new tariffs were not only aimed at major “enemy” countries whose products flood the U.S. market such as China, Canada, and Mexico, but in fact applied to all countries that export to the U.S., including Indonesia.

Indonesia was specifically mentioned by President Donald Trump as a country that hampers U.S. exports both through tariff and non-tariff barriers, making it subject to a 32% import tariff into the U.S. Predictably, within hours, the rupiah began to weaken. When President Trump announced the tariff hike on April 2, 2025, at 4:00 PM Eastern Time (approximately 3:00 AM WIB on April 3, 2025), the exchange rate stood at 1 USD = IDR 16,741. Five days later, the rupiah had depreciated to IDR 17,200 per USD on April 8, 2025. There are concerns that this weakening trend may continue, potentially reaching above IDR 17,500 in the coming days.

US Tariff on the World. Source: US Govt/EEAGLI

As seen in the tariff chart above, although Indonesia ranks 12^th among countries affected by the tariffs -just below China- there has been no official statement from President Prabowo or other senior Indonesian officials, unlike the responses from other presidents, prime ministers, or global leaders. Instead of issuing a strong rebuttal to Trump's policy, Coordinating Minister for Economic Affairs Airlangga Hartarto stated that Indonesia would seek to renegotiate an unlikely outcome considering Trump has declared the policy final and effective since its announcement on April 2, 2025.

Rupiah Weakening

The most immediate impact of President Trump’s tariff policy was a weakening of the rupiah. This can be explained by several factors:

1. Negative Market Sentiment
   After the Indonesian Stock Exchange took a hit many times, Indonesian products were metaphorically hit by a “Trump tariff uppercut” in global markets. Investors tend to withdraw funds from riskier rupiah assets in favor of safer assets like the U.S. dollar, potentially pushing the rupiah past the psychological threshold of IDR 17,000 per USD.
2. U.S. Interest Rate Hike
   The import tariffs lead to rising inflation in the U.S., prompting the Federal Reserve to consider raising interest rates. This causes capital outflows from emerging markets like Indonesia. Although Bank Indonesia (BI) has responded with strategies like the “Triple Intervention” (spot market, Domestic Non-Deliverable Forward, and secondary market bond purchases), these may not be enough to stem the outflow.
3. Export Decline
   The 32% tariff directly reduces the competitiveness of Indonesian exports, negatively impacting the trade balance and exchange rate. According to the United Nations Comtrade data released in early April 2025, Indonesia had a trade surplus with the U.S. of $1.57 billion (around IDR 26 trillion), driven by labor-intensive products such as electronics, garments, vegetable oils, and fisheries. With the 32% tariff effective from April 2, U.S. consumer prices for these goods may rise by 10–20%, leading consumers to seek cheaper alternatives. This could further accelerate factory closures and layoffs in Indonesia’s electronics and garment sectors.
4. Global Economic Uncertainty from Conflicts
   Like gasoline poured onto fire, Trump’s policies exacerbate economic uncertainty in the context of global conflicts. This uncertainty strengthens the U.S. dollar as a safe haven currency.

Responding to Trump’s Policy

President Trump’s tariff policy could actually serve as a blessing in disguise for Indonesia by revitalizing domestic industrial production. Higher import tariffs make foreign products more expensive, creating an opportunity for local products to fill domestic demand.

So, Trump’s “Make America Great Again” slogan can be countered with “Make Indonesia Great” by stimulating local industry. Key strategies include:

1. Export Market Diversification
   While U.S. exports may decline, new markets open up, such as:

• The European Union (Germany, Netherlands, France) for textiles, footwear, and furniture
• China for agriculture, rubber, and vegetable oils
• India for coffee, tea, and spices
• Nigeria and South Africa for manufacturing and agriculture products
• The Middle East (Saudi Arabia, UAE) for food and beverages

Despite the controversy surrounding Trump’s tariff policy, for American citizens, the intent is admirable: to create jobs, boost domestic manufacturing (Made in USA), and shift tax burdens from citizens to foreign businesses. Compare this with the government in “Konoha,” (A satire on Indonesia, taking references from the Japanese manga Naruto) which imposes various taxes on its citizens while offering generous incentives to foreign investors.

*) DISCLAIMER

Articles published in the “Your Views & Stories” section of en.tempo.co website are personal opinions written by third parties, and cannot be related or attributed to en.tempo.co’s official stance.

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