Complete! The Government's New Response to Trump's 32% Tariff on Indonesian Goods

United States (US) President Donald Trump has imposed burdensome new import tariffs on many countries. Indonesia now faces a 32% reciprocal tariff plus a 10% base tariff on exports to the US.

So what is the government's latest response?

The Ministry of Foreign Affairs (Kemenlu) issued at least nine statements, as quoted by CNBC Indonesia on Friday (April 4, 2025).

• On April 2, 2025, the US President officially imposed a reciprocal tariff on Indonesia of 32%, from the 10% base tariff applied to all countries and the current US tariff. This US reciprocal tariff will take effect on April 9, 2025.
• The imposition of these US reciprocal tariffs will significantly impact the competitiveness of Indonesian exports to the US. Indonesia's main export products to the US market include electronics, textiles and textile products, footwear, palm oil, rubber, furniture, shrimp, and marine fishery products.
• The Indonesian government will immediately assess the impact of the US tariffs on these sectors and the Indonesian economy as a whole. It will also take strategic steps to mitigate any negative impact on the national economy.
• The Indonesian government is committed to maintaining stable yields on Government Securities (SBN) amidst global financial market volatility following the announcement of US reciprocal rates. Together with Bank Indonesia, the Indonesian government also continues to maintain the stability of the rupiah exchange rate and ensure foreign exchange liquidity remains adequate to support business needs and maintain overall economic stability.
• Since the beginning of this year, the Indonesian government has been preparing various strategies and measures to address the imposition of US reciprocal tariffs and has been negotiating with the US government. A cross-ministerial and institutional team, Indonesian representatives in the US, and national business players have been coordinating intensively to prepare for the US reciprocal tariffs.
• The Indonesian government will continue to communicate with the US government at various levels, including sending a high-level delegation to Washington DC to conduct direct negotiations with the US government.
• As part of the negotiations, the Indonesian Government has also prepared various steps to address the issues raised by the US Government, particularly those presented in the National Trade Estimate (NTE) 2025 report published by the US Trade Representative.
• President Prabowo has instructed the Indonesian Cabinet to implement strategic steps and structural improvements, as well as deregulation policies, including simplifying regulations and eliminating restrictive regulations, particularly those related to non-tariff barriers. This is also in line with efforts to increase competitiveness, maintain market confidence, and attract investment to maintain economic growth momentum. The Indonesian government will also take other strategic policy steps to continue improving the investment climate, increasing economic growth, and creating broad job opportunities.
• Indonesia has communicated with Malaysia, the ASEAN Chair, to take joint action, considering that all 10 ASEAN countries are affected by the imposition of US tariffs.

Previously, President Prabowo Subianto's administration claimed to have prepared a strategy to counter the impact of Trump's import tariff policy. According to Noudhy Valdryno, Deputy for Dissemination and Information Media at the Presidential Communications Office (PCO), three "major initiatives" had been implemented long ago to address the turmoil.

Noudhy explained that the President had been designing these strategic policies since his first day inauguration. He stated that these three policies, working together, were capable of ensuring Indonesia's continued growth and development despite global economic disruption.

"In facing global challenges, including the United States' new tariff policy, President Prabowo has demonstrated a keen eye for geopolitical dynamics. His deep understanding of international relations and global trade is a key strength in maintaining Indonesia's economic stability," Noudhy said in an official statement.

These policies include:

a. Expansion of Trading Partners

Noudhy explained that Indonesia's membership in the BRICS economic alliance strengthens its position in international trade. He believes that Indonesia's membership in BRICS strengthens various multilateral trade agreements.

Indonesia has signed agreements such as the Regional Comprehensive Economic Partnership (RCEP) with 10 ASEAN countries and Australia, China, Japan, South Korea, and New Zealand, which covers 27% of global trade, and its accession to the Organization for Economic Cooperation and Development (OECD), which covers 64% of global trade. It also has several other trade agreements, including the CP-TPP, the IEU-CEPA, and the I-EAEU CEPA.

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

b. Accelerating Downstream Processing of Natural Resources

According to Noudhy, the Prabowo administration prioritizes downstreaming policies. Nickel is a successful example. Furthermore, Prabowo has launched the Danantara Investment Management Agency, which he claims will accelerate the downstreaming of strategic natural resources.

"BPI Danantara will fund and manage downstream projects in key sectors such as minerals, coal, oil, natural gas, plantations, maritime affairs, fisheries, and forestry," he said.

c. Strengthening Domestic Consumption

According to Noudhy, the Free Nutritious Meal Program and the establishment of 80,000 Red and White Village Cooperatives aim to increase domestic consumption, reduce dependence on imports, and strengthen the domestic economy. The program is expected to boost household consumption, which contributes 54% of Indonesia's GDP.

"By strengthening international trade relations, optimizing natural resource potential, and increasing domestic consumption, President Prabowo has proven that Indonesia can continue to grow even amidst global uncertainty," Noudhy said.

Source: CNBC Indonesia

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