Economic ties: The entrance to the Bank Indonesia headquarters in Jakarta. Trade Minister Budi Santoso said that the government would “try to reapproach” the United States for a bilateral agreement. — Bloomberg
JAKARTA: The government has said it will be pursuing a bilateral trade agreement with the United States during Donald Trump’s presidency, but whether that succeeds will depend on what Indonesia can bring to the discussion table.
Many expect Trump to prioritise inward-looking economic policies, which in trade could materialise in a quid pro quo approach.
The experience of Trump’s first term as president suggests he will frown upon trade partners that ship more goods onto United States soil than they import.
Washington may try to level out the trade balance, if not tilt it in United States favour, by imposing steeper import tariffs.
Coordinating Economic Minister Airlangga Hartarto told reporters in Jakarta on Jan 13 that Indonesia was “rather immune” to such a policy from the United States, given that many of the archipelago’s products shipped to the United States, such as “shoes and apparel”, had long been subject to tariffs.
However, Airlangga said Indonesia would strive for a bilateral economic agreement with the United States to lower tariffs, and a free trade agreement (FTA) was among the options for what it might seek to secure with Trump.
Trade Minister Budi Santoso also told reporters in Jakarta last Wednesday that the government would “try to reapproach” the United States for a bilateral agreement.
Asked whether Indonesia should be worried about a possible decline in exports to the United States under Trump, Budi said there was no cause for concern, since the trade relationship between the two countries had barely changed during Trump’s first term in office from 2017 to 2021.
Indonesian non-oil and gas exports to the United States jumped by US$1.4bil to US$17.1bil in 2017, Trump’s first year in office, according to Statistics Indonesia.
The United States has been among Indonesia’s largest trade partners for many years, but with Indonesia exporting more goods to the United States than it imports.
In 2024, Indonesia exported US$26.3bil worth of goods to the United States while importing only around US$9.4bil, bringing its trade balance with the United States to a record surplus of US$16.8bil, which is also the largest trade surplus Indonesia has with any country.
Muhammad Habib, a researcher from the Jakarta-based Centre for Strategic and International Studies, expressed doubt that Indonesia would secure an FTA with the United States.
“Trump’s main agenda is to decrease the trade deficit,” Habib told The Jakarta Post last Friday, pointing out that if an FTA would not change the bilateral trade balance in Washington’s favour, it was “unlikely” that Trump would approve it.
Bank Permata chief economist Josua Pardede told the Post last Friday that irrespective of how FTA talks with the United States might play out, what Jakarta needed to do was to increase the competitiveness of Indonesian products and diversify export markets.
Nevertheless, Indonesia could bring investment concessions and incentives to the discussion table to try and sweeten a trade deal, said Josua.
“The Indonesian government could offer special incentives in the sectors that will support the domestic industry in the United States,” said Josua, before mentioning critical minerals as an example, which could supply the American automotive industry.
National Economic Council chairman Luhut Pandjaitan said last Wednesday that he had recently talked with “friends” in the United States about critical minerals.
“My friends said what if Indonesia and America, regarding critical minerals, could have joint ownership. I told them we’d be very welcoming,” said Luhut, without elaborating on what he meant by “joint ownership” or who the “friends” were, according to Bloomberg Technoz. “There’s only one point now, that is mutual benefit,” he added.
Discussions around a critical minerals agreement between Jakarta and Washington were kickstarted in late 2023, when then-president Joko “Jokowi” Widodo welcomed US vice-president Kamala Harris in Jakarta. — The Jakarta Post/ANN
