Introduction: A challenging global backdrop for Indonesia’s trade policy
More than a year into President Prabowo Subianto’s term, Indonesia faces a tougher global trade environment. The United States’ tariff actions, shifting rates, and targeted sectors have multiplied uncertainty for exporters, manufacturers, and policymakers. In response, Jakarta has sought to rebalance its trade stance—seeking resilience, diversification, and strategic engagement with key partners—while preserving domestic growth and national security considerations.
Tariff dynamics and policy recalibration
America’s evolving tariff regime has forced Indonesia to rethink its exposure to external shocks. While tariffs may offer short-term leverage in negotiations, they also raise costs for Indonesian industries dependent on imported inputs and disrupt regional supply chains. In this context, the government has pursued a recalibration approach: protecting strategic domestic sectors, narrowing vulnerabilities to external price swings, and pursuing faster tariff liberalization where supply chains and production costs align with national interests.
Targeted protection and strategic concessions
Policy actions have emphasized targeted protections for critical segments such as agriculture, textiles, and electronics assembly, while creating avenues for expedited clearance and simplification for goods that contribute to export competitiveness. Analysts note that the balance between protection and openness will be crucial as external conditions remain volatile.
Diversification of export markets and products
Indonesia has long relied on a handful of commodities and trading partners. The current year has accelerated efforts to diversify both the product mix and customer base. In practice, this means expanding value-added exports—upgrading raw minerals, automotive parts, and processed agricultural products—alongside cultivating new demand in resilient markets in Southeast Asia, Africa, and Latin America. The strategy aims to reduce dependence on any single buyer or region and to build a more robust current account position over time.
Industrial policy as a facilitator
Industrial policy plays a supporting role by aligning domestic investment with export potential. Policies encouraging processing and manufacturing domestically, improving logistics, and streamlining regulatory procedures help Indonesian firms move up the value chain and participate more effectively in global value chains. In turn, this supports job creation and regional development, which are central to Prabowo’s broader political economy.
Regionalism, mega-regional pacts, and strategic alignment
Indonesia’s trade stance also reflects a strategic shift toward regionalism. Engagement with Southeast Asian partners through ASEAN and regional trade pacts offers a cushion against external shocks and provides platforms for rules-based cooperation. Additionally, Jakarta has signaled openness to other multilateral and bilateral arrangements when they align with national interests, especially in sectors with high growth potential and technology transfer opportunities.
Domestic resilience: supply chains, digital trade, and investment
Beyond tariff policy, strengthening domestic supply chains remains a priority. Investments in logistics, digital trade facilitation, and the digital economy are seen as levers to reduce transaction costs and increase competitiveness. At the same time, attracting foreign direct investment in high-value manufacturing and green technologies is viewed as essential to unlocking sustainable growth and broadening Indonesia’s export base.
What the first year means for the road ahead
The initial year has underscored the need for a consistent, transparent, and predictable policy framework. Stakeholders argue that clear communication, timely data, and evidence-based adjustments will determine whether Indonesia can weather tariff volatility while advancing diversification and domestic resilience. As global trade continues to evolve, Prabowo’s administration faces the task of balancing protection with openness to keep Indonesia competitive on the world stage.
