US tariff: Experts warn of risks to Indonesia’s local industries

JAKARTA, Indonesia (MNTV) – Indonesia’s trade deal with the United States has sparked concerns about how local industries will compete in a more open and competitive market, say analysts. 

The US has set a 19% tariff on Indonesian exports, a significant drop from the initially proposed 32%. In exchange, Indonesia has agreed to remove nearly all tariffs on US goods and eliminate non-tariff barriers like import licenses.

“If we compare with other countries’ tariffs like Vietnam 20%, Malaysia 25%, Thailand 26%, Indonesian tariffs is the lowest one,” Joshua Pardede, an economist, told CGTN.  

Joshua says a 19% tariff could have ripple effects, potentially threatening over 1.5 million jobs. 

At the heart of this agreement is nickel, a key material in electric vehicle batteries. Indonesia holds the largest reserves of nickel in the world.

The government has now agreed to remove export restrictions on this critical mineral, a move experts say could reshape the global electric vehicle (EV) supply chain. 

“The EV industry manufacturing in Indonesia again will face tighter competitiveness,” says Joshua, adding that Chinese EV cars will still be more competitive than those made in the US. 

But there are risks too. While the deal creates new opportunities in sectors like EVs, it could also put pressure on local small and medium businesses. 

Indonesian President Prabowo Subianto says this agreement will strengthen ties between Western economies and partners like China by positioning Indonesia as a bridge in global trade, particularly in critical sectors like textile, agriculture and renewable energy.

“This deal marks a major shift in Indonesia’s trade landscape. But it also raises the question about how local industries will adapt,” says Silkina Ahluwalia.

“With foreign goods flowing in more easily, those industries will face tough competition, and without the right support from the government, some might struggle to survive.”