By: Sidya Wiratma )*
The Indonesian government has demonstrated its readiness to face the United States’ protectionist policies through an approach that strategically integrates fiscal policy and trade diplomacy. In facing the challenge of high tariffs imposed on a number of Indonesian export products, the government’s response is directed at strengthening cross-sector coordination and long-term structural adjustments.
Concrete steps have been shown through diplomatic initiatives carried out by the Coordinating Minister for Economic Affairs, Airlangga Hartarto. During a working visit to the United States, the Indonesian government submitted a comprehensive offer covering tariff issues, non-tariff barriers, and a trade balance balancing plan. The government considers that a mutually beneficial approach is more effective in reducing the impact of unilateral policies. This can be seen from Indonesia’s efforts to encourage equal export tariffs with competing countries such as Vietnam and Bangladesh, in order to create fair competition conditions.
In addition to the negotiation approach, Indonesia is also encouraging investment cooperation as part of economic diplomacy. One national company is even planned to invest billions of dollars in the blue energy sector in the United States, demonstrating Indonesia’s commitment to building mutually beneficial bilateral relations. On the other hand, the issue of strategic minerals is an important concern, given Indonesia’s great potential in supporting the global industrial supply chain.
The United States government has also responded positively to this initiative by appointing trade representatives to continue technical negotiations. As a form of seriousness from both parties, a confidentiality document has been agreed to maintain the exclusivity of the negotiation process. In following up on this, Indonesia has formed a special task force covering the fields of trade, investment, employment, and business climate. The goal is clear, namely to accelerate the diplomatic process and strengthen national readiness to face the impacts of external policies.
The effects of high tariffs not only impact trade flows, but also affect the production and employment sectors. This is a concern for the Program Director of the Institute for Development of Economics and Finance (INDEF), Eisha Maghfiruha Rachbini, who assessed that a 32 percent tariff from the US could trigger a significant decline in Indonesian exports. According to him, sectors such as textiles, electronics, furniture, and agricultural and plantation products will be directly affected, causing a slowdown in production and the threat of workforce reductions.
In this context, the government is considered necessary to take tactical steps through fiscal adjustments in the form of tax incentives, subsidies, and financing facilities in order to maintain business continuity and the competitiveness of the national industry. Optimization of bilateral and multilateral trade agreements is also being intensified. Cooperation such as RCEP, EU-CEPA, and TIFA are used as instruments to expand market access and strengthen Indonesia’s position amidst increasingly complex global trade dynamics. The government is also opening up opportunities for trade cooperation with non-traditional countries, as a form of diversification to reduce dependence on the US and Chinese markets.
The synergy between fiscal and trade does not stop at the policy level. Active collaboration between the government, business actors, and academics is also part of the responsive strategy being implemented. This was emphasized by the Deputy Chairperson for Macro and Microeconomic Policy Analysis of the Indonesian Chamber of Commerce and Industry (Kadin), Aviliani, who assessed that national business actors are increasingly ready to face global challenges. She emphasized the importance of making the crisis a momentum to strengthen competitiveness and the importance of cross-sector cooperation in formulating long-term strategies.
The government itself has formed a joint committee involving elements of the government, academics, and the business world. This step aims to identify trade barriers and encourage deregulation to strengthen national investment and exports. Fiscal and non-fiscal incentives, such as interest subsidies and tax reductions, are considered important instruments to help businesses survive and even thrive amidst global pressures.
In addition, the government’s efforts to strengthen the production sector through technological innovation, improving the quality of the workforce, and investing in research are long-term priorities that continue to be improved. Digital transformation, industrial downstreaming, and the development of leading sectors are important elements in creating a resilient and adaptive economic structure. These steps are not only aimed at overcoming external pressures, but also strengthening the foundation of the national economy so that it can compete in a dynamic global ecosystem.
Government response to policies
The United States tariffs also reflect Indonesia’s firm position as a strategic partner that prioritizes the principle of mutual respect in international relations. The approach developed is not merely reactive, but proactive in creating fair and sustainable solutions. This shows the maturity of Indonesia’s economic diplomacy in managing pressure from abroad without sacrificing domestic interests.
All of these efforts show that the government, through synergy between fiscal measures, trade policies, and diplomatic strategies, is able to respond to global challenges with a solid long-term vision. By combining diplomatic instruments and fiscal policies in a targeted manner, Indonesia demonstrates its ability to manage global risks while encouraging inclusive and highly competitive economic growth. This strategic and integrated approach is believed to be an important foundation in maintaining national stability amidst global uncertainty.
)* Economic Policy Consultant – People’s Economic Forum
