US Tariff Shock Forces Indonesia to Recalculate Trade Strategy

WASHINGTON DC, Investortrust.id — The United States and Indonesia will hold further talks after the US Supreme Court struck down President Donald Trump’s reciprocal tariffs on Friday, Feb 20, 2026 in Washington, a ruling that reshapes the Agreement on Reciprocal Trade and forces Jakarta to reassess its export strategy as Trump moves to impose a temporary 10 percent global tariff, officials say.

The decision injected fresh uncertainty into a trade framework that had only just been signed and still awaits ratification in both countries.

The US Supreme Court ruled six to three against the emergency based reciprocal tariffs introduced under the International Emergency Economic Powers Act, declaring that the law did not grant the president authority to impose such sweeping levies.

President Donald Trump swiftly responded by announcing a new 10 percent global tariff to take effect from Monday, Feb 24, 2026 for up to 150 days, citing persistent trade deficits that he said reached $1.2 trillion in goods.

For Indonesia, the legal reversal comes at a delicate moment.

The Agreement on Reciprocal Trade, signed during President Prabowo Subianto’s visit to Washington, was designed to reduce trade friction and secure preferential access for labor intensive exports ranging from garments to footwear and fisheries products.

Haryo Limanseto, spokesperson for the Coordinating Ministry for Economic Affairs, said Jakarta was closely monitoring developments and preparing follow up discussions.

“There will be further discussions between the two sides regarding every decision taken, and Indonesia will continue to prioritize national interests and domestic needs,” Haryo said Saturday.

He emphasized that the bilateral trade agreement had not yet taken effect because both sides still required ratification.

“This agreement still requires ratification on our side and also in the United States, especially given the latest legal developments,” he said.

Exports in the Crosshairs

The United States remains one of Indonesia’s largest export destinations, particularly for manufactured goods that employ millions of workers.

Garments, footwear, rubber products, electronics components, furniture, and fisheries products collectively anchor supply chains that are sensitive to even small tariff changes.

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A uniform 10 percent tariff, even if temporary, could erode price competitiveness against rivals such as Vietnam and Mexico, which are similarly affected but may benefit from existing supply chain proximity advantages.

Economists in Jakarta said the greater risk lies not in the rate itself but in policy unpredictability.

Repeated legal reversals and executive actions complicate corporate planning, delay investment decisions, and increase hedging costs for exporters already navigating currency volatility and soft global demand.

At the same time, the court’s decision removes the more punitive country specific reciprocal tariffs that had ranged as high as 34 percent for China and 25 percent on selected goods from Canada and Mexico.

That rollback potentially prevents a broader escalation in global trade tensions that could have depressed commodity prices, a key pillar of Indonesia’s external earnings.

Steel and aluminum tariffs imposed under separate statutory authority remain intact, limiting the direct benefit for Indonesian metal producers.

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Market Signals and Strategic Choices

Wall Street rallied after the ruling, with the S and P 500 rising 0.69 percent and the Dow Jones Industrial Average gaining more than 200 points, reflecting relief that the most aggressive tariff structure had been curtailed.

For Indonesia, the immediate market reaction offers only partial comfort.

A temporary 10 percent levy still introduces cost pressures for exporters, while the unresolved status of the Agreement on Reciprocal Trade means preferential terms remain uncertain.

Policy makers in Jakarta now face a strategic balancing act. They must continue negotiations with Washington while accelerating diversification into other markets, including the Middle East, South Asia, and Africa, to reduce reliance on US demand.

The episode also underscores the importance of domestic competitiveness reforms, from logistics efficiency to regulatory certainty, as Indonesia seeks to attract foreign manufacturers repositioning supply chains.

For now, officials say dialogue remains the preferred path. The coming weeks of negotiation will determine whether the bilateral trade pact can withstand legal turbulence in Washington or whether Indonesia must once again adapt to shifting global trade currents.