Indonesia was one of the first countries to start negotiations with the United States over the “Liberation Day” tariffs imposed by the Trump administration. However, the prospects of a stable deal that could be accepted by both countries are hazy.
Key takeaways:
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Jakarta must accept the possibility that the US might not view tariff negotiations as one between equals.
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Due to Trump’s inherent unreliability, Jakarta needs to be aware that Washington might renege on any deal and that it might not present a long-term solution.
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Even if no deal is achieved, Jakarta needs to be ready to shore up its economy to mitigate the fallout of tariffs.
On April 2, almost every country was hit by US increased tariffs. The White House justified the 32 percent tariffs on Indonesia by citing its nontariff barriers, including local content requirements and other policies allegedly unfavorable to American businesses. After a series of flip-flops, US President Donald Trump postponed the tariffs for 90 days on April 9, leaving Indonesia subject to a 10 percent base-rate tariff until July, pending negotiations.
According to M. Fadhil Hasan, a senior economist at the Institute for Development of Economics and Finance, the US’s “reciprocal“ tariffs on Indonesia were based on the assumption that Jakarta applies a 64 percent tariff on US imports — a number Hasan called “murky,” noting that Indonesia’s actual rate is closer to 8–9 percent.
What damage might these tariffs inflict on Indonesia? Chairul Tanjung, chairman of CT Corp, one of Indonesia’s largest conglomerates, and former Coordinating Minister for Economic Affairs, reckons they will deal a major blow to the global economy. That, in turn, would dampen global demand and depress the price of commodities, such as oil. Due to Indonesia’s dependence on commodity exports, strategic steps are required to make sure the Indonesian economy does not suffer significant damage. The deputy chair of the National Economic Council, Mari Elka Pangestu, has emphasized the need for good-faith diplomacy and proactive engagement with both the United States and China.
The US and Indonesia: Same planet, different plane
Following the tariff announcement, Jakarta quickly moved to respond. Foreign Minister Sugiono flew to Washington on April 14 to set the ground for negotiations, with the rest of the Indonesian delegation following later. Coordinating Minister for Economic Affairs Airlangga Hartarto led the meetings with the US Trade Representative Jamieson Greer and Secretary of Commerce Howard Lutnick, which led to a pledge of further technical negotiations between the two sides. The target completion date of the talks is within 60 days, and according to the Indonesian side, the discussions should address not just offers but also requests from Indonesia to the US.
At home, not everyone thinks negotiations will go well. Hikmahanto Juwana, a professor of International Law at the University of Indonesia, thinks they will be fruitless. One central question is whether Washington will be willing to engage in good-faith talks. Trump, after all, has bragged that other countries are lining up to “kiss his ass” for a better deal. That should have been a warning for Jakarta: however well-prepared the delegation, the outcome may still be one-sided.
Few US officials seem inclined toward compromise. Secretary of State Marco Rubio has brushed aside concerns about market turmoil. Lutnick is a vocal supporter of Trump’s tariffs and has suggested that Trump should run the global economy. Secretary of the Treasury, Scott Bessent, meanwhile, has openly warned countries against retaliating — and threatened consequences for those cozying up to China. “That would be cutting your own throat,” he said. He claimed that the US is prepared to talk with 70 partners and that Trump can reach tariff deals with US allies before approaching China as a group.
Indonesia is not a traditional US ally, and it’s obvious that the US will not approach the negotiations with Indonesia like equals. The strategic aim behind the tariffs isn’t exactly hidden: Washington is attempting to build an economic coalition to pressure China. That’s not lost on Jakarta.
China has been Indonesia’s largest trading partner for over a decade. In January, Indonesia became the first Southeast Asian state to join BRICS as its first Southeast Asian member. On April 13, Presidents Subianto and Xi Jinping spoke by phone, with Xi pledging to deepen China-Indonesia ties — a promise warmly received in Jakarta. Despite rising regional tensions, the current administration sees closer cooperation with Beijing as a priority. Aligning with Washington to counter China seems highly unlikely.
Some of the ‘non-tariff barriers’ to US goods in Indonesia according to Washington are the Quick Response Code Indonesian Standard (QRIS), the National Payment Gateway (GPN), and the Halal certification. Reacting to Washington’s complaints about the QRIS and GPN, Hartarto answered that Indonesia remains open to foreign payment providers, like Mastercard and Visa. Meanwhile, Nahdlatul Ulama (NU), the largest Muslim organization in Indonesia, has encouraged the Indonesian government to remain firm on halal certification requirements toward imported goods, in spite of the White House’s demands. According to the NU Chairman Yahya Cholil Staquf, protecting Indonesia’s Muslim-majority population from consumer food, beverages, and products that do not comply with halal standards is the Indonesian government’s duty.
White House officials have said that the concessions Washington wants vary from country to country. It appears that specific outlines of new trade deals could reach beyond tariffs and trade barriers to other sectors, such as US foreign aid and military presence. “One-stop shopping,” Trump called it, leveraging tariffs to extract concessions across a range of issues. For Indonesia, two particularly sensitive topics may be on the table, both of which were brought up during the first Trump administration. Washington wants Indonesia to host American spy planes inside the country as a countermeasure against China and to sign the Abraham Accords, a series of US-brokered agreements that normalized diplomatic relations between Israel and several Arab nations, including the UAE, Bahrain, Morocco, and Sudan.
Given this backdrop, the question becomes: what exactly can Indonesia hope to achieve? And more importantly, where should it draw the line?
Chance favors the prepared mind
So is it all gloom and doom for Indonesia? Not quite. Chairul Tanjung, for example, thinks Indonesia can weather the tariffs as their impact would be minor and that it could still maintain a surplus in trade with the United States. Hikmahanto Juwana has gone as far as to say that Indonesia should not even bother negotiating with the US. Instead, he opined that Jakarta should form a joint approach with other tariffed countries to avoid Washington’s divide and rule tactics. Facing such a joint approach by commodity exporters, he thinks, the US would eventually cave in given the impact it will have on prices for American consumers.
Cynthia Yohanna Kartikasari, a lecturer at the University of Surabaya, has noted that only around 10 percent of Indonesia’s exports go to the US. That leaves 90 percent of trade open for diversification, including opportunities in China and ASEAN. Her view aligns with that of former Vice President Jusuf Kalla, who said Indonesia does not need to retaliate given the limited scale of the tariffs.
From outside the country, the Asian Development Bank’s Nguyen Ba Hung also struck an optimistic note, pointing out that Indonesia’s exports to the US account for just 2 percent of its GDP. The real engine of the Indonesian economy, he noted, is domestic consumption and investment.
Indonesia has a difficult balancing act ahead, but not an impossible one. The road to Washington may be rocky, but it’s not the only path forward. If talks stall, Jakarta still has other options — and a growing network of partners willing to chart a different course.
