By: Safira Widyastini
The Indonesian government has taken a strategic step by pursuing negotiations in response to tariff policies imposed by U.S. President Donald Trump on Indonesian products. Faced with a 32% reciprocal tariff imposed by the U.S., the Indonesian government has opted to resolve this issue through diplomacy rather than retaliation, which could potentially harm both countries. To this end, Indonesia sent a delegation led by Coordinating Minister for Economic Affairs Airlangga Hartarto to negotiate in Washington.
In addition to Airlangga, the Indonesian negotiation team included Minister of Foreign Affairs Sugiono, Deputy Minister of Finance Thomas Djiwandono, Director General of International Trade Negotiations at the Ministry of Trade Djatmiko Witjaksono, and Deputy Chair of the National Economic Council Mari Elka Pangestu. The primary objective of these negotiations is to seek a middle ground that protects Indonesia’s economic interests—particularly in the export sector—while also strengthening bilateral trade relations.
The 32% reciprocal tariff imposed by the U.S. is higher than those applied to other countries, such as Malaysia (24%), India (26%), Japan (24%), and Singapore (10%). While it remains lower than the 46% imposed on Vietnam, Indonesia has refrained from taking direct retaliatory measures. Airlangga Hartarto explained that the Indonesian government chose diplomacy because it is considered more constructive and offers broader opportunities for cooperation.
Indonesia offered several proposals during the negotiations, including increasing imports of various U.S. commodities such as energy (particularly crude oil and LPG) and agricultural products like soybeans and wheat. Airlangga emphasized that the increase in imports would be a diversion—shifting imports of these commodities from other countries—so as not to raise Indonesia’s overall import volume. This strategy is expected to balance the trade between the two countries without harming Indonesia’s economy.
Minister of Energy and Mineral Resources, Bahlil Lahadalia, added that the energy sector—especially LPG and crude oil—could significantly contribute to maintaining this balance, with transaction values estimated to exceed US$10 billion.
Bahlil Lahadalia stressed the importance of the energy sector in supporting trade balance efforts. According to him, Indonesia has great potential to increase energy imports from the U.S., which could yield long-term benefits for both nations. As a country rich in natural resources, Indonesia is also committed to strengthening its domestic energy sector while reducing its dependence on energy imports from other countries.
As of 2022, Indonesia recorded a trade surplus with the U.S. According to data from Statistics Indonesia (BPS), in 2015, the trade surplus was recorded at US$8.65 billion, which increased significantly to US$16.67 billion in 2022. The total trade surplus with the U.S. from 2015 to March 2025 reached US$115.78 billion. This reflects the importance of maintaining balanced trade relations, with Indonesia not solely relying on exports but also managing imports to support domestic economic stability.
In addition to increasing imports, Indonesia is also offering various incentives and facilities for U.S. companies operating in the country. These include streamlined licensing processes and other operational supports. In strategic sectors, Indonesia is proposing cooperation in the management of critical minerals and simplification of import procedures for U.S. horticultural products.
Investment is another key focus in these negotiations. Indonesia is promoting the growth of strategic investment through business-to-business schemes, with a focus on sectors such as education, technology, digital economy, and financial services. The government also highlighted the surge in U.S. import tariffs on Indonesian textiles and garments, which could now reach up to 47% due to an additional 10% tariff policy. Textiles, footwear, and furniture are among Indonesia’s key export commodities to the U.S., making this tariff increase a major concern.
The Indonesian government hopes to reach and implement a framework agreement within the next 60 days. Airlangga emphasized that the scope of the negotiations extends beyond trade and investment partnerships to include critical sectors such as supply chain resilience and the strengthening of essential industries. With a successful agreement, Indonesia hopes to establish a fairer trade relationship, avoiding confrontational approaches that could be detrimental to both sides.
Furthermore, U.S. Secretary of Commerce Howard Lutnick expressed appreciation for Indonesia’s commitment and the concrete proposals presented. Lutnick regarded Indonesia’s offers as rational and mutually beneficial—especially compared to proposals from other countries that had not been accepted by the U.S. He also agreed with Indonesia’s 60-day target for concluding negotiations and expressed optimism for further technical meetings to finalize the agreement in greater detail.
This step by Indonesia reflects maturity in trade diplomacy. The Indonesian government is not only focused on short-term economic interests but is also working to build a long-term partnership with the U.S. This approach shows that Indonesia is ready to face global challenges strategically and rationally. As a country committed to defending the interests of its people and national industries, Indonesia remains determined to strengthen its partnership with the U.S., while maintaining a more constructive and mutually beneficial trade relationship.
*) Economic Analyst
