Trump Tariffs Threaten Rupiah Stability and Indonesia's External Balance

JAKARTA, investortrust.id — A proposed 32 percent import tariff by the United States on Indonesian products could significantly disrupt Indonesia's balance of payments and undermine long-term support for the rupiah, as the United States remains Indonesia’s largest net supplier of foreign exchange through a robust trade surplus.

According to a Bahana Securities research note written by Head of Research Putera Satria Sambijantoro and Junior Economist Purbiantoro Lintang, Indonesia posted a trade surplus of $16.8 billion with the United States in fiscal year 2024. This surplus has been a critical pillar of Indonesia’s external position, making the proposed tariff a major macroeconomic threat.

In 2024, Indonesia’s top bilateral trade relationships included surpluses with India ($15.4 billion) and the Philippines ($8.8 billion), while deficits were recorded with China ($11.4 billion), Australia ($4.7 billion), and Thailand ($3.8 billion). This underscores how pivotal the U.S. market has been for Indonesia’s foreign currency inflows.

Bahana noted that almost all of Indonesia’s major exports to the U.S. — particularly manufactured goods like electronics, footwear, and apparel — experienced accelerated growth in 2024, driven by continued resilience in American consumer demand.

These goods benefited from favorable U.S. trade terms, including relatively low average tariffs of around 10 percent, and in some cases zero duties under the Generalized System of Preferences, a program offering duty-free access to goods from developing economies.

If Washington proceeds with the tariff hike, Bahana estimates Indonesia’s monthly trade surplus could decline from around $3 billion to just $700 million–$900 million. This contraction would likely widen the country’s current account deficit to as much as 0.9 percent of gross domestic product in 2025 — nearing the upper threshold of Bank Indonesia’s target range of 0.5 to 1.3 percent.

"The implementation of the new U.S. tariffs could cause lasting damage to Indonesia’s trade balance and, by extension, the rupiah," Satria and Lintang wrote in the research note. "We see risks not only in direct export losses, but also in foreign investment movements and a potential domino effect from other countries adopting similar trade barriers."

The Bahana team also warned of potential retaliatory measures and broader global trends toward protectionism. If more countries impose universal tariffs, Indonesian exports could suffer either directly or indirectly via weakened global demand.

A shift in global foreign direct investment flows may also follow, with capital retreating from emerging markets like Indonesia in favor of developed economies such as Australia, the United Kingdom, and countries in Europe. 

"This could mirror the trade diversion seen during the first U.S.-China trade war in 2017, when Vietnam and Thailand enjoyed surging trade surpluses from rerouted investments," Satria and Lintang wrote.