By: Rafasya Ghani )*
The government of President Prabowo Subianto moved quickly to respond to the wave of global economic pressure caused by the protectionist policies of the President of the United States, Donald Trump.
In facing the tariff war imposed by 32% on export products from Indonesia, the government prioritized an adaptive diplomacy strategy as a form of measured and strategic response.
A high-level delegation from Indonesia has been dispatched to Washington DC to conduct direct negotiations with key US government officials. During the period of Trump’s tariff postponement deadline until June 9, 2025, the government is making maximum use of the time to fight for national economic interests through diplomatic channels.
The negotiating team consists of six main figures who represent Indonesia’s diplomatic and economic strength. Coordinating Minister for Economic Affairs Airlangga Hartarto, Minister of Foreign Affairs Sugiono, Minister of Finance Sri Mulyani, Deputy Chair of the National Energy Council Mari Elka Pangestu, Deputy Minister of Finance Thomas Djiwandono, and Deputy Minister of Foreign Affairs Arrmanatha Nasir, were at the forefront of formulating an agreement that could mitigate the negative impacts of Trump’s tariff policy.
Coordinating Minister for Economic Affairs Airlangga Hartarto said that Indonesia was the first country to be invited to Washington as a strategic dialogue partner. This step shows recognition of Indonesia’s position as a middle power that has a strong diplomatic capacity amidst global economic pressures.
Negotiations were carried out intensively with the U.S. Trade Representative, Secretary of Treasury, and Secretary of Commerce. The main focus of the negotiation efforts included non-paper proposals related to tariff relaxation and non-tariff barriers, investment cooperation, the financial sector, and the preparation of a more inclusive and balanced bilateral trade framework.
One of the crucial issues highlighted was the Domestic Component Level (TKDN) policy. The government has agreed to a limited relaxation only for the information and communication technology (ICT) sector originating from the United States.
According to Deputy Minister of Investment and Downstream Todotua Pasaribu, this decision is selective and will not disrupt the existence of companies from other countries that have complied with the TKDN regulation of 35%.
On the fiscal side, the government is offering relaxation in the form of reducing import Value Added Tax (VAT) and Import Income Tax (PPh) for products originating from the US. The PPh 22 import rate for goods with API has been cut from the previous 2.5% to 0.5%, specifically for electronic, cellular, and laptop products. Meanwhile, import duties which were originally 5-10% have been adjusted to 0-5%.
The next step is to increase bilateral investment. The government is encouraging state-owned enterprises such as Pertamina and technology companies to further expand their investment in the United States. This strategy is part of a compromise designed so that US companies also increase their investment portion in Indonesia.
In addition, the government has conveyed its commitment to increase the volume of imports from the US by US$18-19 billion as an effort to balance the trade balance. The planned commodities include agricultural products such as wheat and soybeans, engineering equipment, and energy such as LPG and LNG.
Meanwhile, intelligence and national security observer, Dr. Stepi Anriani, assessed that the tariff war due to the protectionist policies of United States President Donald Trump has triggered the threat of deeper global economic fragmentation.
This fragmentation has the potential to change the structure of the international supply chain and accelerate the formation of new economic blocks. In this condition, Indonesia is actually faced with three options, including: fighting US hegemony, submitting to the US dominance scenario, or playing a role as a neutral but strategic mediator.
Dr. Stepi emphasized the importance of strengthening the domestic economic structure as the main shield. According to him, price stability and people’s purchasing power are foundations that must not be replaced at all in facing external pressures. Efforts to attract investment, expand multilateral partnerships, and increase economic intelligence capacity are priority agendas to increase national resilience.
Indonesia’s geographical position in the heart of the Indo-Pacific means that this country cannot just be a spectator in the increasingly heated global dynamics. Tensions in the South China Sea, conflicts in the Middle East, and the US-China feud require the resilience of Indonesian diplomacy that is not only reactive, but also proactive and visionary.
Adaptive diplomacy carried out by the government is not only to respond to unilateral policies from the US, but also marks the transformation of Indonesia’s role inglobal arena.
As a country with a strategic position and truly has a medium economic power, Indonesia can also lead new initiatives such as the Global South Economic Dialogue Initiative to form a consultative platform for other developing countries in an effort to face the dynamics of the global economy that are full of uncertainty as it is today.
With all these strategies, the Indonesian government under the leadership of the eighth President of the Republic of Indonesia, Prabowo Subianto continues to strive to make the country not only a country that is able to survive in the midst of global storms, but also a strong nation that is able to shape the current.
In facing the Tariff War due to Donald Trump’s protectionist policies, adaptive diplomacy is not just an option, but an urgent need that will determine Indonesia’s position in the international economic arena in the future. (*)
)* The author is an economic observer
