One very tough deadline. The Indonesian government and entrepreneurs on Tuesday, July 8, 2025, agreed to continue to pursue diplomacy by negotiating with the President of the United States, Donald Trump, in an effort to lower tariffs.
United States President Donald Trump officially set a reciprocal tariff of 32 percent on export products originating from Indonesia. This policy will take effect on August 1, 2025, as stated in an official letter sent by Trump to Indonesian President Prabowo Subianto and uploaded via his Truth Social account on July 7, local time.
Head of the Presidential Communications Office, Hasan Nasbi, said that the Indonesian delegation is already in Washington DC while others will follow to the US, including Coordinating Minister for Economic Affairs Airlangga Hartarto, after accompanying President Prabowo Subianto at the 2025 BRICS Summit in Rio de Janeiro, Brazil.
"In the letter, President Trump also stated that there is still an opportunity to discuss this (tariff) to be reduced," said Hasan, during a press conference in Jakarta (8/7).
Trump has been recorded several times delaying the implementation of tax rates for products coming from other countries. Initially, the tariffs were to take effect on January 9 but were pushed back to July 1. Now, Trump has given another deadline, which is July 9.
The retreat of the tariff implementation time, said Hasan, can be interpreted that the US provides space for extended discussions and negotiations.
"This means there are several weeks of opportunity for us to negotiate and our nation, our government is very optimistic about the negotiations," said Hasan.
Spokesperson for the Coordinating Ministry for Economic Affairs, Haryo Limanseto, confirmed that Airlangga is scheduled to hold a meeting with representatives of the US Government to discuss US President Donald Trump's recent tariff decision for Indonesia.
"Because there is still room to respond as conveyed by the US Government, the Indonesian Government will optimize the available opportunities in order to maintain national interests going forward," he said.
The leader of Uncle Sam's country argued that the tariffs were an effort to reduce the US trade deficit with Indonesia. According to him, exceptions can only occur if Indonesia moves production to US territory. Trump also threatened that tariffs could be raised higher if Indonesia took countermeasures.
This threat comes on the heels of Trump's statements about policies toward BRICS member countries, which are considered "allied with anti-American policies."
In an earlier post, Trump emphasized that any country that supports BRICS will be subject to an additional 10 percent tariff. "There will be no exceptions to this policy," he wrote.
Thus, the total tariffs potentially imposed on Indonesia could reach 42 percent, a combination of reciprocal tariffs and additional sanctions for BRICS membership.
Trump's remarks came just hours after the BRICS 2025 Summit opened in Rio de Janeiro, Brazil. At the forum, the BRICS publicly expressed concern over rising global protectionist measures.
"We express serious concern over the increase in unilateral tariff and non-tariff measures that disrupt trade and are not in line with WTO rules," their official statement read.
For Indonesia, which officially joined BRICS in 2024, Trump's tariff threat is not just a geopolitical issue - it also has the potential to hit labor-intensive industries and weaken national export performance.
BRICS, which originally started with four members-Brazil, Russia, India, and China-then was joined by South Africa, has now grown to ten countries with the membership of Indonesia, Southeast Asia's largest economy.
However, many in the West still see BRICS as a bloc led by China and Russia, as noted by international relations experts.
A serious threat
The Indonesian Employers Association (APINDO) calls reciprocal tariffs a serious threat to the competitiveness of the national manufacturing sector, especially labor-intensive industries such as textiles, footwear, furniture, and toys.
"The Indonesian government's move to submit strategic commitments worth US$34 billion to strategic partners in the United States is an important part of the negotiation strategy to reduce the threat of US reciprocal tariffs," APINDO said in a written statement.
These commitments include plans to purchase energy, agricultural products, and long-term investments by state-owned enterprises and national investment institutions such as Danantara. Commodities such as cotton, soybeans, corn, dairy products, and crude oil are part of the strategy to reduce trade balance pressure while meeting the needs of the domestic industry.
Although the contribution of Indonesia's exports to the US is only around 10 percent of total national exports, business actors assess that the follow-up effects of the tariff war could be much greater if not responded to immediately. APINDO encourages market diversification, production efficiency, as well as strengthening supply chains and trade remedies.
"Indonesia's success in completing reciprocal tariff negotiations will be largely determined by the strength of national economic diplomacy based on the long-term interests of our industry," they said.
Meanwhile, the Indonesian Textile Association (API) chose not to bother with US President Donald Trump's threat to increase tariffs by 10% for countries that are members of BRICS, including Indonesia.
API Executive Director Danang Girindrawardana sees Indonesia's involvement in BRICS as a step to contribute to various conditions in the future, not only geopolitics in the international arena, but also the flow of the economic supply chain.
"There is no need to worry too much because other countries that are currently members of BRICS also trade with non-BRICS without discrimination," Danang was quoted as saying by Bisnis Indonesia.
Based on data from the Central Statistics Agency (BPS), the main commodity exports to the US include electrical machinery and equipment with an export value of USD1.22 billion or covering 16.71 percent. This figure increased by 17.65 percent compared to the same period in 2024.
Then, footwear amounted to USD657.90 or 9.01 percent of total exports to the US, up 16.62 percent compared to the previous year. Followed by clothing and its accessories (knitted) reaching USD629.25 million or 8.61 percent, up 20.46 percent compared to the previous year
Then, clothing and accessories (not knitted) amounted to USD568.46 million or 7.78 percent of total exports to the US.
Worker Diversification and Stimulus
Director of the Center of Economic and Law Studies (CELIOS), Bhima Yudhistira, assessed that this tariff policy threatens Indonesia's economic stability.
"If the basic tariff is 32 percent plus 10 percent because of BRICS, then the total burden can reach 42 percent. This means there is no progress in terms of negotiations," he said.
According to CELIOS' calculations, if this policy is fully implemented, Indonesia's economic output could potentially fall by IDR164 trillion, labor income could plummet by IDR52 trillion, exports could shrink by IDR105.9 trillion, and around 1.2 million people could lose their jobs.
Bhima emphasized the importance of the government to immediately encourage export diversification to non-traditional markets such as Intra-ASEAN, Middle East, Latin America, and other BRICS countries. However, he cautioned that the market transition period will be tough, especially for labor-intensive industries that depend on the US market.
"The government should subsidize a minimum wage of Rp600,000 per month for three months, as well as a discount on electricity tariffs of up to 40 percent for labor-intensive industries," Bhima said.
He also highlighted the importance of import supervision and revamping the rules of bonded zones.
"If people's purchasing power remains strong, the impact of tariff wars can be minimized. For this reason, budget efficiency policies need to be evaluated so that domestic consumption can be encouraged," he concluded.
