Jusuf Kalla on Trump Tariffs: Negotiate and Strengthen Domestic Industry

JAKARTA, KOMPAS — Although the imposition of tariffs will be directly felt by the United States, its impact risks spreading to Indonesia. In addition to negotiations, strengthening the domestic business climate is also necessary as an anticipation of various emerging risks, including layoffs (PHK).

On April 2, 2025, U.S. President Donald Trump announced that all U.S. trading partner countries would be subjected to an import tariff of 10 percent starting April 5. For Indonesia, a reciprocal tariff of 32 percent will be imposed and will take effect starting April 9.

The 10th and 12th Vice President of Indonesia, Jusuf Kalla, stated that U.S. tariff policies tend to be political in nature as they are imposed on countries rather than on commodities. Therefore, the Indonesian government needs to clarify the basis for the tariff calculations to the U.S. government.

On the other hand, the tariff policy announced by Trump will directly impact the United States. This is because the price increases resulting from the imposed import duties will be borne by U.S. businesses and citizens.

"The entry cost is not paid by us (Indonesia). We only experience the effects, namely that America's purchasing power is expected to decline due to rising prices," he said to the media in Jakarta, Saturday (5/4/2025).

Not only will it weaken the purchasing power of the American public, but the policy may also trigger high inflation. In fact, its impact has already been felt by business actors with the collapse of stocks in the United States.

Furthermore, the impact of the policy will eventually ripple and be felt by Indonesia. Kalla cited the example of coal and nickel commodity sales to China as the main trading partner being affected.

The more rules are made, the more chaotic the country becomes. Does that lead to economic efficiency? No, apparently.

Previously, the Institute for Development of Economics and Finance (Indef) calculated that the imposition of a 32 percent US reciprocal tariff on Indonesia risks eroding export growth by 2.83 percent and economic growth by 0.05 percent (Kompas.id, 4/4/2025).

Kalla asserted that the imposition of reciprocal tariffs by the US on Indonesia will not result in layoffs in the manufacturing industry. However, if it is already in the red, companies will be forced to lay off workers as a last resort.

In the midst of this situation, the government is expected to support the domestic business climate, including by ensuring that business processes run efficiently and in accordance with applicable regulations, and without disruption.

According to Kalla, regulations made by the government, such as the Job Creation Law, do not have a significant impact on the business world. Instead of issuing many regulations, the government should be able to ensure that business processes run smoothly and efficiently according to applicable regulations.

"The more rules are made, the more chaotic the country becomes. Does that lead to economic efficiency? Apparently not," he said.

On the other hand, the President of the Confederation of Indonesian Trade Unions (KSPI) and President of the Labor Party, Said Iqbal, said that the US tariff policy risks triggering a second wave of layoffs. In fact, Indonesia has just experienced the first wave of fairly large layoffs.

Based on records from KSPI Research and Development and the Labor Party, as many as 60,000 workers from more than 50 companies have been laid off throughout January-March 2025. From the provisional calculations, an additional 50,000 workers will be laid off in the three months after the new tariff is implemented.

"The second wave of layoffs is starting to appear. At the company level, several unions have been consulted by management regarding the layoff plan," Said said.

KSPI and the Labor Party also noted that the industries most vulnerable to being hit by the second wave of layoffs are those that are export-oriented to the US. These include the textile, garment, shoe, electronics, food and beverage industries, as well as the palm oil, rubber plantation, and mining industries.

Some companies in the textile, garment, shoe, electronics, and food and beverage sectors are generally owned by foreign investors. If the economic situation is not favorable, they tend to move to other countries that are subject to lower tariffs.

The 32 percent tariff makes Indonesian goods more expensive in the American market. As a result, demand decreases, production is reduced, and companies are forced to make efficiencies, including layoffs.

According to Said, the US import tariff policy has caused companies that were already shaky to fall deeper. However, there have been no concrete steps by the government to anticipate risks, such as production cuts, company closures, or mass layoffs.

"A 32 percent tariff makes Indonesian products more expensive in the American market. As a consequence, demand decreases, production is reduced, and companies are forced to make efficiencies, including layoffs. In some cases, companies even choose to close their operations," Said said.

KSPI and the Labor Party remind us not to let Indonesia become an easy target for market shifts from other countries. Because, China can flood Indonesia when it loses its market to the US, so that the domestic industry is increasingly depressed, and layoffs are increasingly inevitable.

Chairman of the Indonesian Food and Beverage Producers Association (GAPMMI) Adhi Lukman, in his press release, said that Indonesia and the US have established mutually beneficial and complementary trade cooperation.

The US is a priority export market for several of Indonesia's leading food and beverage products, such as coffee, coconut, cocoa, palm oil, vegetable fats, and fishery products and their derivatives. Conversely, Indonesia's food and beverage industry imports various industrial raw materials from the US, such as wheat, soybeans and milk.

Thus, the imposition of US reciprocal tariffs on Indonesia of 32 percent can trigger impacts on industry players. The impacts include increased production costs, decreased exports, and threats to jobs.

According to Adhi, the production costs of national industries using raw materials from the US will increase, reducing the competitiveness of Indonesian products, and increasing the selling price of products in Indonesia.

"High tariffs can also cause a decrease in the volume of Indonesian food and beverage exports to the US and other export destination countries, which will negatively impact the performance and growth of the national industry. The decline in exports can threaten jobs in the food and beverage sector in Indonesia, at a time when the economy is sluggish," Adhi said.