Facing a Turbulent Global Trade Environment
More than a year into President Prabowo Subianto’s administration, Indonesia finds itself navigating a tougher global trade climate. The United States has relied more aggressively on tariffs, with rate changes and target revisions adding uncertainty for exporters and manufacturers. Against this backdrop, Indonesia’s policy makers are seeking a balanced approach that preserves market access, protects domestic industries, and advances long-term growth goals.
Strategic Rebalancing: From Reactive Tariffs to Structural Competitiveness
Indonesia’s initial response has centered on pragmatic measures designed to smooth shocks while preserving the country’s strategic interests. Rather than a blanket retrenchment, policymakers are pursuing a two-track strategy: (1) defend key export sectors by leveraging trade agreements, rules of origin optimization, and targeted non-tariff measures where necessary; and (2) strengthen domestic capabilities through investment in value-added industries, digital trade facilitation, and logistics reform. This rebalancing is about resilience—reducing exposure to external tariff volatility while raising the country’s export competitiveness.
Utilizing Trade Agreements and Regional Platforms
Indonesia has intensified engagement within regional architectures such as ASEAN and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) discussions, aiming to secure more predictable access for its products. By aligning with regional standards, Indonesian firms can reduce non-tariff barriers and exploit economies of scale. The government also emphasizes productive trade agreements that include rules of origin, which help ensure that Indonesian industries receive greater value from participating supply chains.
Non-Tariff Measures as Precision Tools
Tariffs are only part of the policy toolkit. Non-tariff measures—licensing, technical standards, customs procedures, and domestic content requirements—are being calibrated to shield infant industries without isolating them from global markets. The aim is to prevent distortions, improve transparency, and streamline customs processes, which in turn lowers transaction costs for exporters. In practice, this means clearer rules, faster clearance, and more predictable regulatory environments for small and medium-sized enterprises (SMEs) seeking to integrate into regional and global value chains.
Export Promotion and Domestic Upgrading
A core pillar of the rebalanced policy is to boost export competitiveness through targeted support. This includes export financing, insurance schemes, and assistance with product quality upgrades. The government is also prioritizing sectors with high growth potential—machinery, electronics, agribusiness, and processed minerals—while encouraging down-chain value addition to maximize domestic value capture. Strengthening the logistics spine, digital trade platforms, and data-driven market intelligence is critical to helping Indonesian exporters identify opportunities and respond quickly to changing conditions.
Digital Trade and Data-Driven Policymaking
Digital trade is increasingly central to Indonesia’s strategy. By promoting e-commerce readiness, cross-border data flows (with appropriate privacy and security safeguards), and streamlined digital customs, the country aims to lower the costs of doing business and attract investment in tradable sectors. Data analytics also underpins policy design, enabling better forecasting of tariff impacts, supplier networks, and domestic capacity constraints. This evidence-based approach supports a more nuanced response to tariff volatility and supply-chain disruptions.
Risks, Opportunities, and the Road Ahead
Prabowo’s first year has highlighted several risks: a continued global tariff escalation, potential trade frictions with major partners, and the challenge of aligning rapid policy shifts with the political cycle. Yet the moment also presents opportunities to modernize Indonesia’s trade architecture. By consolidating gains in regional integration, strengthening non-tariff governance, and expanding productive capacity, Indonesia can build a more resilient growth model that pays dividends beyond the current tariff cycle.
Conclusion: A Proactive but Pragmatic Path
Indonesia’s trade policy is moving beyond reactive tariff responses toward a proactive, comprehensive strategy that values resilience, competitiveness, and inclusive growth. In Prabowo’s first year, the direction is clear: leverage regional platforms, refine non-tariff tools, accelerate digital trade, and invest in upgrading domestic industries. The result could be a more robust export framework that withstands external shocks while expanding opportunities for Indonesian workers and businesses.
