Be careful what you wish for, lest it come true. That ancient proverb comes to mind when considering the eagerness of the US’ trade partners around the world to negotiate deals with US President Donald Trump’s administration. Indonesia has done so — and it is possibly the first to regret it.
The US has announced a complex, tiered tariff regime, including a 25 percent tariff on labor-intensive goods such as textiles and footwear, a 40 percent tariff on goods suspected of being “transshipped” or having content of Chinese origin, and a 50 percent tariff on so-called “strategic sectors,” including aluminum, copper, semiconductors and pharmaceuticals. An additional 10 percent levy applies to exports from BRICS nations (including Indonesia). Countries might also face anti-dumping duties, which are often steep, politically driven and inconsistently applied.
While these measures hurt US importers and consumers the most, they also significantly heighten uncertainty for exporters. By guaranteeing that Indonesia would not face tariffs exceeding 19 percent on its exports to the US through 2029, its new agreement with the US seems to mitigate this uncertainty, providing a level of protection against Trump’s tariff escalations. Indonesia can now rest assured that it would not face the kinds of extreme tariffs to which China has been subjected.
The Indonesian government argues that such a deal was essential, because even though the US accounts for only 9.9 percent of Indonesia’s total exports, the trade relationship is disproportionately important. Indonesian exports to the US — including apparel, footwear, furniture, rubber products and integrated circuits — are labor-intensive, it notes, and therefore support a substantial number of jobs — but these sectors might remain vulnerable to higher tariffs.
As it stands, it is not clear whether the 19 percent cap applies to all Indonesian exports or if some products — particularly those containing Chinese inputs — could still be subject to steeper duties. In any case, 19 percent tariffs are very burdensome and Indonesia has also agreed to impose no tariffs on US goods. At best, the deal reduces losses; it does not deliver gains.
Moreover, to secure this dubious victory, Indonesia reportedly agreed to purchase 50 Boeing aircraft and commit to importing US$15 billion of US energy products (nearly 40 percent of Indonesia’s total energy imports) and US$4.5 billion of US agricultural products, but many important questions remain unanswered. How will these purchases be financed, and on what terms? What are the specifications, unit costs and delivery time lines? Who would oversee procurement and how would transparency be ensured?
Most important, if these exchanges are merely political gestures, they could turn out to be economically damaging. The use of jets from Boeing, which has faced a string of quality and safety scandals, could create considerable risks for Indonesian airlines, and imports of US agricultural goods risk undercutting local farmers and breaching commitments to ASEAN, as well as other trade agreements.
The deal might affect Indonesia’s trade relationships in other ways. Indonesia has concluded comprehensive trade agreements with several major partners, including Australia, China, India, Japan, New Zealand and South Korea. It is close to finalizing one with the EU and it recently launched negotiations with the United Arab Emirates. If US firms are granted preferential treatment and zero-tariff market access, these partners might question Indonesia’s commitment to fair competition — or demand comparable terms.
Beyond trade, the agreement risks eroding Indonesia’s carefully maintained strategic neutrality. Indonesia has long sought to balance its relationships with the US and China, but this deal could be seen as a lurch toward the US, exposing the nation to escalating pressure to choose a side.
As Indonesia becomes increasingly politically entangled with one giant — with far-reaching economic and strategic consequences — it is at risk of becoming economically dependent on the other.
Over the past decade, Indonesia’s trade with China has more than doubled, reflecting deepening economic ties. While Indonesia exports mostly commodities and processed metals to China — especially nickel, iron and steel, mineral fuels and vegetable oils — it imports high-value machinery, electrical equipment, vehicles and plastics.
In the face of challenging trade relations with the world’s two mightiest powers, the Indonesian government deserves credit for seeking trade assurances, but the deal that it secured with the US lacks clarity, transparency, mutuality and strategic vision. As a result, it might turn out to be largely symbolic, bringing only a slight reduction in short-term costs. In the long term, it might prove economically and even geopolitically damaging.
Three urgent steps can help prevent this outcome. First, the Indonesian government must demand full clarity from the US on the 19 percent tariff cap — are all its exports shielded from Trump’s sector-specific classifications or is the real cost of the deal hidden in the fine print?
Second, the authorities should publish the full details of their procurement commitments, particularly the purchase of Boeing aircraft, and US agricultural and energy products, so that these commitments’ financial implications and strategic value can be assessed.
Finally, Indonesia must reaffirm a long-term trade strategy anchored in diversification, rules-based agreements and regional leadership. Above all, it needs a strategy that avoids excessive dependence on any single partner and preserves its autonomy in an increasingly polarized global economy. Only then can Indonesia ensure that a handshake in Washington does not become a handcuff at home.
Lili Yan Ing, secretary-general of the International Economic Association, is lead adviser for the Southeast Asia region at the Economic Research Institute for ASEAN and East Asia.
Copyright: Project Syndicate
A failure by the Chinese Communist Party (CCP) to respond to Israel’s brilliant 12-day (June 12-23) bombing and special operations war against Iran, topped by US President Donald Trump’s ordering the June 21 bombing of Iranian deep underground nuclear weapons fuel processing sites, has been noted by some as demonstrating a profound lack of resolve, even “impotence,” by China. However, this would be a dangerous underestimation of CCP ambitions and its broader and more profound military response to the Trump Administration — a challenge that includes an acceleration of its strategies to assist nuclear proxy states, and developing a wide array
Jaw Shaw-kong (趙少康), former chairman of Broadcasting Corp of China and leader of the “blue fighters,” recently announced that he had canned his trip to east Africa, and he would stay in Taiwan for the recall vote on Saturday. He added that he hoped “his friends in the blue camp would follow his lead.” His statement is quite interesting for a few reasons. Jaw had been criticized following media reports that he would be traveling in east Africa during the recall vote. While he decided to stay in Taiwan after drawing a lot of flak, his hesitation says it all: If
Twenty-four Chinese Nationalist Party (KMT) lawmakers are facing recall votes on Saturday, prompting nearly all KMT officials and lawmakers to rally their supporters over the past weekend, urging them to vote “no” in a bid to retain their seats and preserve the KMT’s majority in the Legislative Yuan. The Democratic Progressive Party (DPP), which had largely kept its distance from the civic recall campaigns, earlier this month instructed its officials and staff to support the recall groups in a final push to protect the nation. The justification for the recalls has increasingly been framed as a “resistance” movement against China and
Owing to the combined majority of the opposition Chinese Nationalist Party (KMT) and Taiwan People’s Party (TPP), the legislature last week voted to further extend the current session to the end of next month, prolonging the session twice for a total of 211 days, the longest in Taiwan’s democratic history. Legally, the legislature holds two regular sessions annually: from February to May, and from September to December. The extensions pushed by the opposition in May and last week mean there would be no break between the first and second sessions this year. While the opposition parties said the extensions were needed to
RSS