Indonesia Faces Economic Strain as US Imposes 32% Tariff

• US Imposes 32% Tariff on Indonesian Imports

• Indonesia Seeks Trade Solutions to Counter Tariff Impact

By Kenzie Aryasatya, Fayza Nawra Avanitanya, Muthia Noor Safitri, Imam Fakhri Prayogo Harianto 

April 4, 2025 at 16:30 GMT+7

US President Donald Trump has officially announced a new tariff policy for goods entering the US on Wednesday (4/02), which will significantly impact Indonesia. It was announced that around 60 countries will face reciprocal tariffs, with Vietnam being subjected to the highest tariff at 46%. 

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Indonesia ranks eighth on the list of countries subject to the reciprocal tariffs at 32%. This tariff threatens Indonesia’s export performance, especially in key sectors such as textiles, palm oil, and electronics.

Ahmad Khoirul Umam, Head of the Democratic Party’s Strategic Research and Innovation Agency, stated that the US has been a stable export market for Indonesia’s textile industry. However, he warned that the domestic market could face growing pressure as a wave of Chinese imports intensifies competition.

US President Donald Trump delivers a speech at the White House on April 2, 2025, unveiling new trade measures  | Source: Getty Images

President Trump claimed that the high reciprocal tariff towards Indonesia was decided because of Indonesia’s total tariff on US goods reaching 64%. This escalation in trade barriers has significantly increased the cost of Indonesian exports to the US market. 

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Consequently, Indonesia's export volume to the United States is expected to decline sharply, posing a serious threat to the country's foreign exchange earnings. Experts forecast the elevated tariffs will damage the competitiveness of Indonesian products, primarily in key sectors such as textiles, rubber, and manufacturing.

Besides the issue of declining export performance, there is also growing concern over potential pressure on the exchange rate of the rupiah. A weakening rupiah will further drive up import prices of necessary commodities, such as industrial raw materials, consumer goods, and fuel, and contribute to domestic inflation.

Container yard in Indonesia, reflecting the nation’s export operations | Source: JAKARTAGLOBE

To overcome the impact of the rising tariffs, the Indonesian government has demanded immediate measures such as finding new export targets, improving the quality and competitiveness of domestic products, empowering domestic consumption, and implementing trade diplomacy for negotiating the lowering of tariffs with major partners.

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The Ministry of Foreign Affairs' has stated that Indonesia has been in talks with the US government since early this year despite the retaliatory tariffs. The government has also coordinated closely with Indonesian business actors to anticipate the effects of the policy.

The 10 percent base tariff to be imposed by the US will take effect on April 5, while Indonesia's retaliatory tariffs will take effect on April 9. The short window is seen as a chance for Indonesia to negotiate revisions. The government made sure that they will continue negotiating with the US at various levels.

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Sources:

CNBC

CNN

Jakarta Globe