Instead of Tariff Retaliation, RI Offers Solution to Reduce US Trade Deficit

JAKARTA, KOMPAS - Indonesia will join more than 50 countries that have already negotiated with the United States regarding the import tariff policy imposed by President Donald Trump. Instead of retaliating with tariffs, Indonesia will offer several solutions, one of which is increasing imports of raw materials from the US to reduce the US trade deficit.

This was revealed after the Coordinating Minister for Economic Affairs, Airlangga Hartarto, held a meeting with business associations regarding the implementation of new U.S. trade tariffs on partner countries, at the Office of the Coordinating Ministry for Economic Affairs, Jakarta, Monday (7/4/2025).

Also present at this meeting were Deputy Minister of Finance Anggito Abimanyu, Deputy Minister of Industry Faisol Riza, and Minister of Trade Budi Santoso.

According to Airlangga, the opportunity to increase imports from the US is expected to relax the 32 percent import tariff imposed by the US on Indonesia. The government plans to boost imports of commodities from the US that serve as raw materials for industries, such as wheat, cotton, as well as oil and gas products.

"We are increasing imports (in accordance with) the directives of Mr. President (Prabowo Subianto). We will increase the purchase volume so that the U.S. trade deficit, which reached 18 billion dollars in 2024, can be reduced," he stated.

Previously reported, the 2024 trade data shows that the US experienced a goods trade deficit of 1.2 trillion US dollars with 92 countries. However, the US also recorded a surplus with 111 countries. Trump considers the policy of raising tariffs as a solution to heal the US economy from trade deficits with both allies and adversaries.

The U.S. Secretary of the Treasury, Scott Bessent, claimed that more than 50 countries have begun negotiations with the U.S. since the announcement of new base tariffs and import duties on April 2, 2025. However, Bessent and other officials did not mention the names of the countries or details of the discussions.

Airlangga added that the path taken by Indonesia in responding to the U.S. import tariff policy is already in line with all other ASEAN countries. To further discuss the negotiation process, on April 10, 2025, Minister of Trade Budi Santoso will meet with the Trade Ministers of ASEAN countries.

Next week, Airlangga and Foreign Minister Sugiono will depart for Washington DC to submit a negotiation proposal to the US government.

For your information, the US universal tariff of 10 percent will apply worldwide on April 5, 2025. Meanwhile, the reciprocal or “reciprocal” tariff ranging from 11-49 percent to a number of countries will start on April 9, 2025.

By Trump, Indonesia was imposed a new import tariff of 32 percent. This figure is smaller than Cambodia which was given a new import tariff of 49 percent, followed by Laos 48 percent, then Vietnam 46 percent, and Thailand 36 percent.

Meanwhile, Malaysia and Brunei with 24 percent each, then the Philippines and Singapore with 17 percent and 10 percent respectively.

Referring to some data, the total value of US-ASEAN trade in 2024 reached 476.9 billion US dollars with details of US exports to ASEAN of 124.6 billion US dollars and US imports from ASEAN of 352.3 billion US dollars. The record shows that ASEAN has a surplus in trade with the US.

In addition to providing space for increased imports, the Indonesian government will also propose revitalizing the trade and investment cooperation agreement or Trade & Investment Framework Agreement (TIFA) with the US, which according to Airlangga was last signed bilaterally in 1996.

The government will also provide a proposal for deregulation of Non-Tariff Measures (NTMs) through relaxation of the domestic component level (TKDN) in the information and communication technology sector. Then, an evaluation related to the prohibition and restriction of US export and import goods.

In addition, the government is preparing fiscal incentives through several strategies such as reducing import duties, import income tax, or import VAT to encourage imports from the US and maintain the competitiveness of exports to the US.

"There are several that are being studied. Of course we see that our tariffs on products imported from the US are actually relatively low at 5 percent, even for wheat and soya beans it is already 0 percent," said Airlangga.

Currently, the general import VAT rate is 11 percent. Meanwhile, the general import income tax rate is 2.5 percent for Importer Identification Number (API) holders or 7.5 percent without API.

Deputy Finance Minister Anggito Abimanyu did not deny the plan to revise the VAT and import income tax rates on US products. He emphasized that his ministry will support increasing Indonesian imports from the US through various fiscal instruments and ease of tax administration.

The administrative convenience offered includes the acceleration of tax audits based on PMK 15/2025 which cuts the audit duration from a maximum of 12 months to only 6 months. "Group taxpayer audits and transfer pricing have also been cut from 24 months to 10 months," said Anggito.