Trump Tariffs Take Effect, Rupiah and Stock Market Fate on the Brink

JAKARTA, KOMPAS – The United States tariff policy, which also targets Indonesia, has the potential to further pressure the rupiah exchange rate and the stock market. Although the domestic money and stock markets are still on holiday, the shock will be felt as soon as the markets reopen on April 8, 2025.

The President of the United States (US), Donald Trump, has announced a list of base tariffs and import duties for the US's trading partner countries at the White House, US, on Thursday morning (3/4/2025) Jakarta time. Indonesia was not exempt from this policy, being subjected to a 32 percent tariff.

A Professor from the Faculty of Economics and Management at IPB University and Paramadina University, Didin S. Damanhuri, opines that U.S. tariff policies not only cause global economic turmoil. The sentiment of imposing tariffs on Indonesia has the potential to pressure the rupiah exchange rate and the stock market.

"Yesterday (the rupiah) had touched Rp 16,700 per US dollar. Well, now, especially since Indonesia is subject to a 32 percent (tariff), the sentiment. Then, later to the IHSG (Composite Stock Price Index) directly, yesterday there was a capital flight of Rp 48 billion US dollars," he said when contacted from Jakarta.

Quoting Bloomberg, the exchange rate of the rupiah against the US dollar since trading on Wednesday (3/3/2025) Indonesian time has surpassed the level of IDR 16,700. Following the announcement of the tariff policy, the rupiah tended to weaken, with the market opening at the level of IDR 16,770 per US dollar.

On the last trading day of March 27, 2025, the rupiah closed at a level of IDR 16,566 per US dollar, while the Jakarta Composite Index (IHSG) closed at 6,510.62. The financial markets, including both the money market and the stock market, will reopen on April 8, 2025.

With sentiment from within the country alone, such as Danantara, the rupiah is already under enough pressure.

Didin explained that the U.S. tariff policy further exacerbates negative sentiment amid the weakening fundamental condition of Indonesia's economy. This is evident from the increase in foreign debt to approximately Rp 7,000 trillion in January 2025, as well as the State Budget deficit (APBN) amounting to 0.13 percent of the gross domestic product (GDP) in February 2025.

"With domestic sentiments alone, such as Danantara, the rupiah is already under significant pressure. Now, with the combination of sentiments (U.S. tariffs) and their impact on the real sector, it could exceed Rp 17,000 per U.S. dollar in my opinion within the next few days," he stated.

After that, Didin continued, large corporations with a significant US dollar denomination have the potential to reduce their production and may even resort to layoffs (PHK) for efficiency purposes. As a result, inflation rates will rise, and economic growth will be hindered, potentially falling below 5 percent.

Therefore, the government needs to seriously respond to the situation, especially to the people who are now also facing weakening purchasing power. The government's priority programs, especially those that are populist, also need to be evaluated further, in order to maintain the social stability of the community.

Executive Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira Adhinegara said that the weakening of the rupiah is expected to continue, because investors tend to look for safe investment assets (safe haven). The flow of foreign investment capital has the potential to leave the financial markets of developing countries, including Indonesia.

After the Eid holiday, the stock market is preparing to face capital outflow and trading halts, which are not impossible to happen again.

Therefore, pressure on the rupiah exchange rate must be watched out for, considering that it can trigger an increase in the price of imported goods (imported inflation), as well as further suppress people's purchasing power, especially food and secondary needs, such as household equipment and electronics.

"After the Eid holiday, the stock market is preparing to face capital outflow and trading halts are not impossible to happen again," he said when contacted from Jakarta.

Based on settlement data from the beginning of the year to March 26, 2025, foreign investors recorded a net outflow of IDR 4.96 trillion in the domestic financial market. This consists of non-resident net sales in the stock market of IDR 32.02 trillion, as well as net purchases in the Government Securities (SBN) market of IDR 16.08 trillion and net purchases in Bank Indonesia Rupiah Securities (SRBI) of IDR 10.98 trillion.

According to Bhima, Indonesia must prepare to compete to pursue factory reallocation opportunities, and it is not enough to just compete on the basis of lower reciprocal tariff differences from Vietnam and Cambodia.

In this case, consistent regulations, licensing efficiency, legal certainty, readiness of supporting infrastructure for industrial areas, adequate renewable energy sources for electricity supply to industry, and readiness of human resources are needed.

"These factors are much more important because Indonesia can no longer provide excessive fiscal incentives with the Global Minimum Tax. If previously it attracted investors with tax holidays and tax allowances, now is the time to improve fundamental competitiveness," said Bhima.