Fajar Fitrianto, Jakarta – Just when the global economy began adjusting to the idea of a new normal under United States President Donald Trump's reciprocal tariff doctrine, the plot twisted.
On the heels of escalating trade tension, including a 32 percent tariff slapped on Indonesian exports, came a surprising turn: A 90-day pause.
Officially, it's a "strategic review period". Unofficially, it's the kind of cliffhanger that leaves markets, trade ministers and exporters wondering whether to exhale or to brace for Act II. And as expected, not everyone's waiting quietly.
China, for instance, has responded with an 84 percent tariff on US goods, following the US' increase in tariffs on Chinese imports to 125 percent, setting the stage for what may become a wider and less predictable global standoff.
For Indonesia, the pause offers neither clarity nor comfort. It merely presses "pause" on the chaos, not "cancel". And as the global system tilts further into protectionist reflexes and retaliatory theatrics, Indonesia must remain sharp-eyed and steady-footed. Because while others play chess, some pieces, like us, risk becoming the board.
Earlier this month, the US announced sweeping reciprocal tariffs, with a minimum 10 percent on most countries, and up to 32 percent for Indonesia. The move has been branded as fair trade but is being wielded like a bargaining chip.
In the weeks that followed, China retaliated, Vietnam took a hit with a 46 percent tariff and Indonesia watched its trade surplus, US$16.8 billion with the US in 2024, hanging in limbo. Meanwhile, countries like Vietnam and Cambodia wasted no time, swiftly initiating negotiations to soften the blow and protect market access.
Rather than respond with fire, Indonesia has chosen diplomacy and reform. The government rolled out a series of trade concessions to soften the impact and reframe the narrative. Ahead of a planned high-level delegation to Washington, Indonesia cut import duties on a range of US goods, electronics, steel and medical equipment, and pledged to increase purchases of US energy and agricultural products. The message: We're cooperative, not combative.
In parallel, President Prabowo Subianto issued a directive to eliminate import quotas on key goods, a signal that Indonesia is serious about free-market credibility. This move, if implemented, would reduce supply-chain friction, improve price transparency and align Indonesia more closely with global trade norms. For Washington and investors alike, it projects a readiness to modernize rather than retaliate.
Yet the timing carries risk. With China actively seeking new export outlets due to retaliatory tariffs, the removal of quotas could expose Indonesia to dumping pressures, particularly in price-sensitive sectors like steel, footwear and machinery.
To mitigate this, Indonesia must complement liberalization with stronger trade defense tools: Anti-dumping investigations, safeguard mechanisms, countervailing duties and faster monitoring systems. Opening the door to trade is a friendly gesture, but you still need a lock, just in case.
Targeted support is also being prepared for sectors like apparel and footwear, which send more than half their output to the US market and risk being squeezed.
While not a direct target of US tariffs, Indonesia remains highly exposed to China. In 2024, China accounted for 24.5 percent of Indonesia's exports, 30.3 percent of its imports and over 21 percent of its foreign direct investment (FDI).
A slowdown in China, possibly dipping below 4.5 percent gross domestic product (GDP) growth, could weaken regional demand, trigger dumping risks and squeeze Indonesian exporters already under pressure. The Asian Development Bank projects China's growth to fall to 4.3 percent by 2026, while Goldman Sachs warns that full-scale US tariffs could shave 2.4 percentage points off its GDP.
Indonesia's recent moves, such as joining BRICS, deepening RCEP and expanding Local Currency Settlement (LCS) agreements are smart, but they now need speed and scale.
This pause may be a rare moment to build a better hedge portfolio: Not in the financial sense, but by rebalancing market exposure, strengthening supply chain resilience and expanding Indonesia's diplomatic leverage.
Indonesia should accelerate trade diversification beyond the US-China axis, double down on regional and South-South corridors and expand LCS and supply chain agreements with a broader set of partners.
At the same time, it must help local businesses stay competitive by cutting red tape, targeting fiscal support and moving quickly when the global landscape shifts. Because in today's world, resilience isn't just about boosting exports, it's about building systems that protect the economy, no matter what the world throws at us.
Markets welcomed the pause but with guarded optimism. Global equities and trade-exposed sectors saw brief relief rallies, interpreting the delay as a chance for diplomacy. But bond yields and currency volatility remain elevated, especially in emerging markets like Indonesia. Investors may be less fearful, but they are far from reassured.
The window to act is now, before the tariff machinery restarts or reshapes itself. Because a 90-day pause is not a detour, it's a countdown.
From a game theory perspective, Indonesia is playing a complex, multi-board strategy. While the US and China exchange blows in another round of tariff brinkmanship, Indonesia is leaning on strategic restraint, offering cooperation, removing friction and quietly diversifying its alliances through BRICS, RCEP and beyond.
This isn't about winning a single round, it's about surviving the whole tournament. In a world where "Trumponomics" is rewriting the rules of global trade with sharp elbows and short timelines, Indonesia's edge may lie in playing the long game: Staying flexible, building leverage and proving that cool heads can still prevail under pressure.
The writer is senior vice president at a leading Indonesian state-owned bank, with over a decade of experience in banking, finance and the oil and gas industry. The views expressed are personal.
Source: https://asianews.network/what-us-president-trumps-tariff-pause-means-for-indonesia