Jakarta Under Pressure: U.S. Imposes 32% Tariff on Indonesian Exports
The U.S. has imposed a 32% tariff on Indonesian imports, citing structural trade imbalances, local content rules, and restricted market access for American firms. The move puts pressure on Indonesia’s key export sectors such as footwear, electronics, and apparel. Jakarta has opted for diplomacy over retaliation, pledging reforms and seeking new trade partners while preparing to negotiate with U.S. officials. Short-term market volatility is expected
On April 2, 2025, the US imposed a sweeping 32% tariff on Indonesian exports, marking a sharp escalation in trade tensions. The tariffs, enacted under an executive order by President Trump, are part of Washington’s broader agenda to recalibrate trade relationships and address what it describes as systemic imbalances and unfair practices.
The move targets sectors critical to Indonesia’s export engine—apparel, electronics, furniture, and footwear—at a time when the country faces mounting external headwinds. In 2024, Indonesia recorded a US$16.84bn trade surplus with the U.S., driven largely by these sectors. However, Washington contends that this surplus is artificially sustained by restrictive policies including local content requirements (notably a 40% threshold across industries), cumbersome licensing regimes, and foreign exchange controls mandating that export proceeds remain within the domestic banking system.
The flashpoint came to a head with Indonesia's recent block on iPhone 16 sales, citing local component thresholds that U.S. officials argue violate free market norms. These non-tariff measures, according to the Trump administration, amount to a de facto barrier against American exports and have justified what it calls a “reciprocal” tariff—set at half of the estimated 64% effective barrier faced by U.S. firms entering Indonesia.
In contrast to previous episodes of emerging market retaliation, Indonesia has taken a measured approach. Chief Economic Minister Airlangga Hartarto confirmed that Jakarta will prioritise diplomacy, launching a high-level dialogue with U.S. trade officials and exploring regulatory reforms that could address some American concerns. Notably, the government indicated a willingness to dismantle certain non-tariff barriers and review the controversial local content policies to reopen market access channels.
Indonesia is also actively repositioning its trade strategy. With the U.S. and China increasingly volatile as trading partners, Jakarta is pivoting toward Europe and ASEAN as alternative destinations. The government has promised targeted support for affected industries, particularly textiles and footwear, through deregulation, tax incentives, and export facilitation. At a regional level, Indonesia is pushing for coordinated ASEAN action, signalling concern that the tariff move may set a precedent that affects other Southeast Asian exporters.
The immediate economic hit will be felt in capital markets. With the Jakarta Stock Exchange closed for the Eid al-Fitr holiday, the full investor response is yet to materialise. However, early indicators point to currency pressure, with the rupiah already sliding on expectations of trade and portfolio outflows. The Ministry of Economy has yet to publish official forecasts on the tariff impact, citing the holiday closure of key public offices. But with the U.S. accounting for over 10.6% of Indonesia’s non-oil exports—equivalent to US$ 26.3bn in 2024—the downside risks are material. Importantly, the tariffs could trigger a shift in global supply chains, as buyers look to source from lower-tariff markets such as Bangladesh.