Countries worldwide are reeling, the US dollar is gaining strength, and stock markets are facing volatility. This situation results from United States (US) President Donald Trump's policy, which took effect on April 2 and imposed reciprocal tariffs on numerous countries that have trade surpluses with the US.

Indonesia faces a 32 percent tariff when exporting to the US. This rate comprises a 10 percent tariff that the US applies to all countries and the specific tariffs currently imposed on Indonesia. These reciprocal tariffs will take effect on April 9 and will significantly impact Indonesia’s export competitiveness in the US market. The main products that Indonesia exports to the US include electronics, textiles and its products, footwear, palm oil, rubber, furniture, shrimp, and other seafood products.

Less than 24 hours after the tariffs were officially implemented, President Trump announced an unexpected delay in imposing these tariffs on Thursday, April 10. This delay will impact reciprocal tariffs for 56 trading partner countries, including Indonesia, and will last for 90 days or three months.

The delay mentioned does not apply to the People's Republic of China (PRC). Recently, China responded to Trump’s tariff policy by imposing import tariffs on US goods up to 145 percent. In addition, China has implemented other non-tariff measures, such as banning certain US-made films from entering the country and prohibiting its citizens from traveling to or studying in the US. Despite these actions, the US government continues to allow imports of information technology products, mobile phones, microprocessor chips, and laptops from China.

In response to the US reciprocal tariff policy, Coordinating Economic Affairs Minister Airlangga Hartarto acted quickly to establish communication with other ASEAN countries affected by these tariffs. He decided to visit Malaysian Prime Minister Datuk Seri Anwar Ibrahim, who is currently serving as the ASEAN Chair for 2025.

Indonesia and Malaysia plan to leverage the Trade and Investment Framework Agreement (TIFA) with the United States to obtain mutual benefits from reciprocal trade and pursue cooperation agreements. Coordinating Minister Airlangga stated, “There is a need for synchronization among all ten ASEAN member states. All are affected by the US reciprocal tariff policy, so it is essential to communicate and collaborate with the US government collectively.”

Following the US government's stance, Indonesian Finance Minister Sri Mulyani Indrawati and the finance ministers of ASEAN countries prepared a policy response to President Donald Trump’s tariffs during the ASEAN Finance Ministers’ Meeting under Malaysia’s chairmanship.

Minister Sri Mulyani stated that the US policy undermines the world trading rule-based system, such as the World Trade Organization (WTO) and Bretton Woods Institutions.

“The United States created this system after World War II to foster shared economic progress, but it has triggered the relocation of factories/manufacturing out of the United States and created unemployment,” said Minister Sri Mulyani on Thursday, April 10.

The U.S. reciprocal tariff policy compelled each country to enter into bilateral negotiations with the Trump administration. However, among the numerous countries affected by the tariffs, only the People's Republic of China (PRC) retaliated by imposing counter-tariffs. In response, the U.S. escalated trade tariffs to 125 percent.

During the meeting, all ASEAN finance ministers discussed the current economic conditions resulting from President Trump's policies, steps to address and mitigate risks, and efforts to negotiate with the United States.

The minister highlighted that ASEAN, with an economic size of US$3 trillion and a population exceeding 650 million, has significant potential for enhanced cooperation and strengthening of the regional economy.

Therefore, President Prabowo Subianto and the Red and White Cabinet are preparing various measures to address these global challenges. One such measure is deregulation, which involves simplifying regulations and eliminating those that hinder progress, especially concerning Non-Tariff Barriers.

It aligns with efforts to enhance competitiveness, maintain market confidence, and attract investments to sustain economic growth momentum. Other strategic policy measures include improving the investment climate, boosting economic growth, and creating wide-ranging job opportunities.

This situation presents opportunities for Indonesia to expand its markets beyond the United States. During President Prabowo Subianto's administration, Indonesia joined the BRICS economic alliance, which includes Brazil, Russia, India, China, and South Africa. This move was aimed at enhancing Indonesia's position in international trade. Indonesia's membership in BRICS also strengthens various multilateral trade agreements.

Indonesia has also signed several trade agreements, including the Regional Comprehensive Economic Partnership (RCEP) with ten ASEAN member states, along with Australia, China, Japan, South Korea, and New Zealand. This partnership accounts for 27 percent of global trade. Additionally, Indonesia has joined the Organization for Economic Co-operation and Development (OECD), representing 64 percent of global trade. The country is also involved in various other trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA), and the Indonesia-Eurasian Economic Union Comprehensive Economic Partnership Agreement (I-EAEU CEPA).

In addition to various multilateral trade agreements, Indonesia has established bilateral trade agreements with countries such as Korea, Japan, Australia, Pakistan, the United Arab Emirates, Iran, Chile, and others.

State Budget as Buffer and Deregulation

The government continues to depend on the State Budget (APBN) to safeguard against the potential threat of a trade tariff war. It was highlighted during an Economic Discussion Forum held in Jakarta on Monday, April 7. President Prabowo Subianto and several business people, economists, and labor representatives attended the event.

During the event, Minister Sri Mulyani explained that the government relies on the state budget to address global economic shocks caused by the US reciprocal tariffs. To support low-income communities (MBR), a total of Rp504.7 trillion has been allocated in the 2025 State Budget for various social protection programs. These programs include the Family Hope Program (PKH), staple food cards, energy subsidies, village direct cash assistance (BLT), and KUR (microcredit) interest rate subsidies.

“We will continue to make reforms, especially in tax, customs, and procedural areas to truly reduce the burden. As emphasized by President Prabowo Subianto, this is the right time for more ambitious deregulation and reform,” said Minister Sri Mulyani.

The government aims to lower the 14 percent burden of import tariffs that businesses currently face. It will be achieved by reducing the tax burden on businesses by 2 percent through tax administration and customs reforms. The import income tax (PPh) tariff will be cut from 2.5 percent to 0.5 percent, while the import tariff will be adjusted from the current range of 5-10 percent down to 0-5 percent. The export tax on crude palm oil (CPO) will also be reduced.

President Prabowo Subianto welcomed the proposals from the forum and planned to discuss them with the Cabinet. The forum dialogue session covered various issues, including the proposal to establish a layoff task force to address the increase in layoffs, the request for policy flexibility on the Domestic Component Level (TKDN), the simplification of investment bureaucracy and licensing, incentives provision for labor-intensive industries, protection for workers affected by industrial disruption, and the call to establish a business ecosystem that is more adaptive to technological advancements and global market changes.

According to Novita Haridi, a House of Representatives (DPR) member, Indonesia must continue to seek opportunities despite the threat posed by a global crisis resulting from US tariff policies. Trade with the US accounted for approximately 8.1 percent of Indonesia's total trade. However, the recent increase in import tariffs of 32 percent could potentially reduce both the volume and value of this trade.

“There are several positive but limited impacts on the domestic economy, particularly for the lower-middle business segment from this policy,” she said.

She also said that the increase in US tariffs could encourage businesses to explore new export markets and enhance their market value. For instance, with government support, Indonesia could target new markets in South Asia, the Middle East, and Africa.

This step also aims to reduce dependence on exports to the US. Since Indonesian goods are already "licensed" for export to the US, they will encounter fewer obstacles in meeting standards when entering new markets.

Another opportunity is strengthening the domestic industry. If Indonesia also subjected US goods to high tariffs, local products could be able to compete better in the domestic market. Moreover, this could lead to increased import substitution, creating opportunities for micro, small, and medium enterprises (MSMEs) to increase their market value.

Writer: Kristantyo Wisnubroto

Editors: Untung S/Erik Limantara

Translator: Wisnu Wardoyo