Counting Down the Days to Trump Tariffs, Manufacturing Faces Double Risk

JAKARTA, KOMPAS – Ahead of the implementation of high import tariff policies by the United States, dual risks loom over the domestic manufacturing industry. The Indonesian government must act swiftly to negotiate and engage in diplomacy with the U.S. to alleviate the tariff burden.

The dual risks to the national manufacturing industry stem from potential disruptions in both the U.S. and domestic markets. In the U.S. market, due to the implementation of high import tariffs amounting to 32 percent, the competitiveness of Indonesian products could decline significantly.

In the domestic market, locally manufactured products also risk being overshadowed by the influx of foreign goods from other countries. This occurs because nations affected by Trump's tariff policies are seeking new target markets. Indonesia has the potential to become a new target.

The import tariffs that US President Donald Trump called “Liberation Day” will take effect on April 9, 2025. There are 57 countries, including Indonesia, that will face reciprocal import tariffs from the US with varying levels, from 10-49 percent.

This means that only three days remain before the implementation of the Trump tariffs. The imminent enforcement of the Trump tariffs has begun to raise concerns among several manufacturing industry players, including the Indonesian Electrical Equipment Manufacturers Association (APPI).

According to the Chairman of APPI, Yohanes P. Widjaja, if there are no negotiation results between the Indonesian government and the U.S. within the next three days, domestic products exported to the U.S. will lose their competitiveness.

"The government must immediately negotiate and engage in diplomacy as time continues to pass. We need to engage in bilateral discussions. The imposition of import tariffs on electrical products by the U.S. will have a negative impact on Indonesia's exports," said Yohanes when contacted in Jakarta, Sunday (6/4/2025).

Based on data from the Central Bureau of Statistics (BPS), the export value of machinery and electrical equipment products and their parts to the US reached 3.45 billion US dollars in 2023 and increased to 4.18 billion US dollars in 2024.

In kilograms (kg), Indonesia's electricity products to the US in 2023 reached 127 million kg and increased to 391 million kg in 2024. Meanwhile, in January 2025, electricity products exported to the US had reached 349.75 million US dollars with a weight of 30.4 million kg.

The electricity industry is even a commodity that has the highest export value contribution from a total of 15 main sectors in Indonesia.

"In addition to China and Vietnam, our electrical products in the US are considered potential and quite large. Electrical products such as power transformers, distribution transformers, medium and low voltage electrical panels, electric meters," said Yohanes.

He said that many Indonesian electrical products are absorbed in the US because the country is aggressively building a technology industry. "Our products are also competitive and competitive because last year, (imports) of Chinese electrical products were stopped by America," he said.

The US import duty (IDR) policy on Indonesian products is feared to not only reduce export value. However, it also limits the number of products and the competitiveness of quality domestic products in the international market.

The company does not yet know how much it will cost as a result of the new import tariffs. Domestic electricity industry players are currently communicating with customers or potential buyers in the US regarding the calculation of the tariffs.

"Our electrical equipment products are of a quality that is already competitive in the international market. We need the presence of the government to maintain the local industry," Yohanes said.

Another impact that is feared by all manufacturing industry players is the flood of imported products into Indonesia. Especially through dumping practices from other countries that are also affected by high US tariffs.

There are concerns that local industries will "collapse" due to illegal import practices and the Indonesian government's zero percent import duty policy for products from Southeast Asia, China and India.

Amidst the rapid negotiation efforts with the US, the government must think about how to save the local industry. Therefore, Yohanes hopes that the domestic component level (TKDN) policy will be maintained and not relaxed in response to Trump's policy.

In principle, domestic manufacturing industry products must be increasingly absorbed in the domestic market. As an industrial player, Yohanes feels that the TKDN policy is able to increase demand for domestic products, provide investment certainty, and attract new investment to Indonesia.

One of them, he encouraged the Indonesian government to respond to the tariff "attack" by negotiating through tariffs as well, not shifting the issue to the aspect of non-tariff measures or non-tariff barriers

"If necessary, our government will impose a zero percent import tariff on US electrical products. Negotiations like this have been carried out by Vietnam. We entrepreneurs are also afraid, is this (TKDN) what is meant by non-tariff barriers? Because, we entrepreneurs already feel protected by TKDN," he said.

The government continues to coordinate across ministries and institutions and establish communication with the Office of the United States Trade Representative (USTR), the United States Chamber of Commerce, and other partner countries.

The coordination is in order to formulate the right strategic steps to respond to the US reciprocal tariff policy. The hope is that every policy taken later will consider various aspects comprehensively and be in line with national interests.

The government emphasized that Indonesia will not take retaliatory steps against Trump's tariff policy and will choose to take the path of diplomacy and negotiation to find a mutually beneficial solution for both countries.

This approach was taken by considering the long-term interests of bilateral trade relations, as well as to maintain the investment climate and national economic stability.

"We are given a very short time, April 9, and asked to respond. Indonesia will prepare an action plan by considering several things, including imports and investment from the US," said Coordinating Minister for Economic Affairs Airlangga Hartarto in a virtual Limited Coordination Meeting on the US Reciprocal Tariff Policy, Sunday.

The government is also considering the potential impact of tariff policies on a number of export-oriented, labor-intensive industrial sectors, such as the apparel and footwear industries.

The sector is considered vulnerable to global market fluctuations, so the government is committed to continuing to provide support through various targeted incentives to maintain competitiveness and business continuity.

Indonesian products that will be subject to reciprocal tariffs under Section 232 are steel, aluminum, cars and car parts, strategic products such as copper, semiconductors, wood products, pharmaceuticals, bullion (precious metals), and certain energy and minerals that are not available in the US.

The voices of industry players will be heard as part of the policy strategy formulation process. The government also continues to deeply examine the implications for the country's fiscal and maintain the stability of the state budget in the medium and long term.

Researcher at the Department of Economics at the Center for Strategic and International Studies (CSIS), Dandy Rafitrandi, said that in the waiting period leading up to the implementation of Trump's tariffs, the government must be more active in intensifying negotiations like other countries.

The active negotiation is to ensure that Indonesia's main products exported to the US market can still be absorbed, such as textile products that absorb a lot of labor. Likewise, other industries such as electrical products, furniture, and fisheries, which have contributed to the national economy.

In the negotiations, the Indonesian government must be able to convince the US that Indonesia is a large market for producing quality products, by utilizing raw materials from the US such as wheat, soybeans, cotton, and others.

"Those are the goods that we have the potential to import more from the US, so that President Trump sees Indonesia as having good intentions and also being a very promising market potential. Our domestic market has a strong position to improve the trade balance," he said.

However, the current tariff war and retaliation from China and several countries will change the world trade map. When Chinese products can no longer enter the US market freely, they will shift to Indonesia as another country with the largest population.

"This is what we need to pay more attention to. The challenges and threats in the form of export products from abroad entering Indonesia will be greater because of the high US tariffs," he said.

Meanwhile, Paramadina University Economist Wijayanto Samirin said Prabowo's move to assign Coordinating Minister for the Economy Airlangga Hartarto and Finance Minister Sri Mulyani was appropriate and relevant to draft the substance of the negotiations. The next challenge is how the two ministers draft realistic substance, a middle ground, and design a negotiation or communication strategy.

According to Wijanto, in terms of substance, Indonesia's response to the US must be part of a grand strategy for national economic transformation. "The substance must also contain a middle-ground solution. Don't let it be that because you want to please Trump, our other important partners, including India, China, Korea, the EU and Japan, feel neglected. This has the potential to cause new problems," he said.

From the negotiation side, Indonesia must understand that Trump does not like the multilateral approach. The government's idea of using the ASEAN umbrella needs to be avoided. Because, besides inviting Trump's resistance, uniting ASEAN is not easy because of different interests.

In this case, a bilateral approach is needed, especially since Trump is a one-man-show figure. Direct communication between Prabowo and Trump is considered effective to be implemented at the ministerial level.

However, beyond the bilateral approach, Indonesia still needs to strengthen trade and investment cooperation with various countries by utilizing the sentiment of shared fate. For example, with the European Union, ASEAN, India, the Middle East, even Africa and Latin America.

According to Wijanto, Trump's reciprocal tariffs should be a momentum to improve domestic economic conditions. The government needs to calibrate the state budget. Programs that waste the budget must be reduced to prioritize short-term programs so that they have a direct impact on purchasing power and job creation.

"Domestic demand needs stimulus to replace foreign demand that has the potential to decline," he said. In addition, the government must also complicate and stop illegal imports so that there is no potential for lost revenue in the future.