Indonesia Faces Trade Headwinds as U.S. Tariffs and Commodity Slump Threaten Surplus
Key Takeaways
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JAKARTA, Investortrust.id — Indonesia’s trade momentum is set to weaken in September and October 2025 as a combination of new U.S. tariffs, falling global commodity prices, and softening manufacturing demand in key markets threatens to erode export strength.
The economist team at PT Bank Rakyat Indonesia (Persero) Tbk warned that, “The prices of Indonesia’s main export commodities all declined in September 2025, meaning export values are projected to fall and exert a negative impact on the trade balance.” They added, “Falling PMIs among Indonesia’s major export destinations are likely to weigh on the trade surplus in September.”
Commodities at Risk
Palm oil, nickel, and coal—Indonesia’s flagship commodities—entered September under pressure. Futures data showed palm oil down 0.64% month-to-month, nickel down 4.75%, and coal down 1.21%. These moves matter: palm oil exports surged 51.1% year-on-year in August and were the single largest driver of the surplus, while nickel exports jumped 16.3% year-on-year. A reversal in prices directly undermines Indonesia’s export receipts.
August’s figures masked these risks. The country posted a $5.49 billion trade surplus, the largest in three months and up from $4.17 billion in July. It marked 64 consecutive months of surplus. Exports edged up to $24.96 billion while imports fell sharply to $19.48 billion. On an annual basis, the surplus rose nearly 100%, though the pace was slower than July’s extraordinary fivefold increase.
Manufacturing Shows Strain
Beneath the headline surplus, manufacturing trends reveal weakness. While commodity exports grew strongly, shipments of manufactured products such as steel, machinery, and electrical equipment softened compared with July. Imports paint the same picture: raw materials and capital goods that fuel factories dropped significantly. Imports of plastics fell 15.3% year-on-year, organic chemicals dropped 11%, and machinery contracted 7.3%.
According to the BRI report, “The decline in imports indicates that manufacturing exports are likely to weaken in the coming months, as the sector depends heavily on imported inputs.” With more than 90% of imports used for intermediate and capital goods, this contraction signals a slowdown in domestic industry rather than an efficiency gain.
China’s Growing Grip
The geographic breakdown highlights shifting trade dynamics. China continued to strengthen its role as Indonesia’s anchor partner. Exports to China rose 16% year-on-year in August, making up 23% of total shipments, while imports from China climbed 8.2% and now represent 40.6% of Indonesia’s purchases.
By contrast, exports to the United States dropped 12.4% and to India fell 9.5%. Exports to ASEAN and the European Union grew modestly, with Singapore and the Netherlands leading gains, but these increases were not enough to offset losses in the U.S. and Indian markets. Imports from Japan, the U.S., ASEAN, and the EU also fell steeply, with a 37.4% drop from Singapore and a 21% decline from the Netherlands.
This asymmetry shows Indonesia’s rising dependence on China both as buyer and supplier. While beneficial in sustaining exports during global softness, it leaves Indonesia more exposed to potential shocks in Chinese demand.
Structural Oil Deficit
One persistent feature of Indonesia’s trade account is the structural deficit in oil and gas. The deficit widened slightly to $1.66 billion in August from $1.58 billion in July. This reflects the reality that domestic fuel consumption far outstrips refining capacity. Economists say the consistency of this deficit underscores the need for longer-term energy investment and diversification strategies.
Policy and Banking Implications
The government is in talks with Washington to ease the 19% tariff imposed on Indonesian exports. Officials are pushing for exemptions on palm oil, rubber, and cocoa—commodities not produced in the U.S.—and aim to finalize negotiations in October. Until then, exporters face a tougher pricing environment.
For the financial sector, the trade shifts have direct consequences. The BRI economist team highlighted two key risks: first, that sectors heavily reliant on imported inputs or exposed to volatile global prices face higher non-performing loan (NPL) risk; second, that exporters may increase demand for hedging instruments. “There are opportunities to grow fee-based income from hedging services for clients with foreign exchange exposure, while banks need to strengthen asset quality monitoring and rebalance their portfolios,” the report said.
Outlook: Surplus at Risk
The outlook for September and beyond is mixed. On one hand, weaker imports may temporarily support the surplus by reducing outflows. On the other, declining commodity prices, softening external demand, and higher tariffs threaten to shrink export earnings. Indonesia’s PMI drop from 51.5 in August to 50.4 in September suggests that domestic demand is also slowing.
If tariffs remain in place and commodity weakness persists, analysts warn that Indonesia’s streak of 64 consecutive monthly trade surpluses could narrow in the months ahead. The balancing act between sustaining external surpluses and supporting domestic manufacturing momentum will be central to policy debates heading into year-end.