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The Semanggi overpass in Jakarta, Indonesia.
U.S. President Donald Trump’s tariffs have prompted several nations to reassess their trade dynamics with the United States and to negotiate the specific duties imposed on their imports.
In response, Indonesia aims to “narrow” or possibly eliminate its trade surplus with the U.S., as articulated by Finance Minister Sri Mulyani Indrawati during the recent IMF-World Bank Spring Meetings, highlighting the country’s proactive stance in the evolving trade landscape.
This initiative follows the imposition of a significant 32% tariff on Indonesian exports to the U.S. by Trump on April 2, which was later reduced to 10% as part of a temporary suspension on tariffs for select countries and commodities.
Indrawati pointed out that Indonesia, rich in natural resources, has been perceived as engaging in trade limiting practices through various “non-tariff barriers,” including cumbersome administrative and customs processes, as well as taxation requirements surrounding imported goods.
To bolster its trade relationship, Indonesia intends to increase its imports of agricultural products, such as wheat, soybeans, and corn, from the U.S. “While we import from multiple countries, we can always discuss ways to enhance the U.S. position in supplying these agricultural products,” she stated.
Additionally, the country is exploring opportunities to import more oil and gas, particularly liquefied gas, to supplement its domestic production, which currently falls short of meeting national energy demands, according to the finance minister.
These discussions arise as Indonesia reported a trade surplus of $4.3 billion with the U.S. from January to March 2025, an increase from $3.61 billion during the same timeframe the previous year. The U.S. has emerged as the largest contributor to Indonesia’s total trade surplus of $10.92 billion in the first quarter.
However, Indonesian trade with the U.S. constitutes less than 2% of the nation’s gross domestic product, suggesting a relatively minor impact overall. Indrawati elaborated, “So, it’s not really that big,” considering that total exports represent 20% of Indonesia’s GDP.
Nonetheless, she noted that the repercussions of Trump’s tariffs might influence other countries’ strategies, pushing them to diversify their exports away from the U.S. market.
Maintaining Rupiah Exchange Rate Stability
In a strategic effort to uphold the exchange rate stability of the Indonesian rupiah amid a volatile macroeconomic environment, Bank Indonesia has maintained its policy rates for the third consecutive review.
The central bank has kept its benchmark 7-day reverse repurchase rate, also referred to as the BI Rate, unchanged at 5.75%, aligning with expectations from nearly all economists polled by Reuters, with the exception of two. Additionally, the bank has held its other two policy rates steady.
This decision arrives in the wake of the Indonesian rupiah experiencing significant depreciation, alongside a steep decline in the Jakarta Composite Index, as capital outflow accelerated following the U.S. proclamation of “reciprocal tariffs” targeting several countries, including Indonesia.
The central bank’s action aims to ensure the stability of the rupiah while continuing to evaluate options for potential rate cuts based on inflation trends and growth forecasts, as noted by Governor Perry Warjiyo. “At this time, our primary focus is on maintaining exchange rate stability. Once we achieve that, the possibility for a rate cut will present itself, allowing us to make informed decisions on future interest rate policies,” he remarked.
In the aftermath of the Bank Indonesia’s decision, the rupiah experienced a slight decline, weakening 0.12% against the dollar to 16,800.
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