U.S. President Donald Trump has announced that starting August 1, 2025, all Indonesian goods entering the U.S. could face a 32% import tariff, unless Indonesia or its companies invest in the United States.
As reported by the Jakarta Globe, this policy is part of Trump’s broader effort to reduce the U.S. trade deficit. He claims trade between the two countries has long been unbalanced and that previous negotiations have not resolved this issue.
In a letter addressed to President Prabowo Subianto and publicly shared on President Trump’s Truth Social account, he confirmed that the United States will impose a flat 32% tariff on all Indonesian imports, in addition to any existing product-specific tariffs, unless Indonesia agrees to invest in operations based in the United States.
“There will be no tariff if Indonesian companies build or manufacture products in the U.S.” Trump wrote, promising fast-track approvals for any businesses willing to do so.
He also issued a warning against attempts to avoid the tariffs through transshipment, a tactic where goods are routed through third countries to disguise their origin, which could trigger even higher penalties.
Originally scheduled for July 9, the new tariff deadline has been extended by three weeks to give Indonesia time to respond.
What This Means for Indonesian Exporters
If these tariffs are enforced:
- Indonesian goods will become more expensive in the U.S. market, making them less competitive.
- Sales could drop significantly as American importers seek cheaper alternatives.
- Exporters with smaller margins or no U.S. partnerships may be hit hardest.
To potentially avoid the tariffs:
- Indonesian businesses can explore setting up operations, warehouses, or joint ventures in the U.S.
- It is critical to avoid risky shipping practices that might be seen as tariff evasion, as these could lead to even tougher penalties.
Meanwhile, Indonesia has made efforts to improve trade relations. Coordinating Minister for Economic Affairs Airlangga Hartarto recently announced a $34 billion memorandum of understanding with U.S. partners, including $15.5 billion in American fuel imports and investment deals involving Indonesian state-owned companies. However, as of now, there’s no update on whether this deal will affect Trump’s tariff plan.
Adding more complexity, Trump has also warned of an extra 10% tariff on countries supporting BRICS, a group that includes China and Russia. Indonesia is a new member of BRICS and recently participated in its summit in Brazil.
Bottom Line for Indonesian Businesses:
This is a critical situation. If no deal is reached, Indonesian exporters will face a dramatic increase in tariffs, from the current 10% to 32%, which could severely affect their competitiveness and sales in the U.S.
Exporters should:
- Evaluate the potential impact on pricing and profit margins.
- Explore investment options in the U.S. to qualify for tariff exemption.
- Stay updated on negotiations and trade developments.
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