- In April 2025, the United States launched a sweeping “reciprocal tariff” policy, imposing a 10% baseline tariff on nearly all imports and up to 50% on goods from 57 countries with large trade surpluses. The policy aims to counter decades of non-reciprocal trade and reduce the $1.2 trillion US trade deficit. However, exemptions apply to USMCA partners and selected critical goods.
- The Trump administration’s method of defining “reciprocal tariffs” is unconventional, basing the rate on the extent of the U.S. trade deficit with each country rather than mirroring their actual tariffs. This approach aims to balance bilateral trade but has drawn sharp criticism from economists, who argue that it oversimplifies trade dynamics and misrepresents actual protectionist barriers.
- Compared to the targeted measures of the 2018–2019 trade war, which focused on specific industries and countries, the 2025 policy adopts a comprehensive, blanket approach affecting nearly all imports. This shift not only heightens protectionism to unprecedented levels but also extends its impact to traditional allies, marking a stark departure from previous measures.
- Indonesia faces major risks from the new US tariffs, which now impose a steep 32% tariff on exports to US, including key sectors like apparel, footwear, electronics, rubber, and palm oil. These tariffs threaten billions in trade, potentially causing order cancellations, job losses—especially in the textile sector—and financial strain for local firms and banks. The rupiah may weaken amid falling exports and investor uncertainty, raising concerns over stagflation.
- In the near term, reciprocal tariffs will lead to disrupted trade, higher costs, and inflationary pressures, particularly in the US, which may face slower growth. In the medium term, the tariffs could drive shifts in global supply chains, with investments moving to countries exempt from US tariffs, and could prompt further regional trade bloc development. Longer-term, Indonesia may accelerate export diversification and structural reforms to reduce reliance on the US market and improve competitiveness, while global trade dynamics could fragment into US and China-centered blocs.
Toward Stronger Financial Industry in Indonesia