Will Indonesia regret its trade deal with Trump?

Be careful what you wish for, lest it come true.

- Lili Yan Ing

That ancient proverb comes to mind when considering the eagerness of America's trade partners around the world to negotiate deals with US President Donald Trump's administration. Four countries already have, with Indonesia the latest to do so — and possibly the first to regret it.

The United States has announced a complex, tiered tariff regime, including a 25% tariff on labour-intensive goods such as textiles and footwear, a 40% tariff on goods suspected of being “transshipped” or having content of Chinese origin, and a 50% tariff on so-called “strategic sectors’, including aluminium, copper, semiconductors, and pharmaceuticals. An additional 10% levy applies to exports from Brics countries (including Indonesia). Countries might also face anti-dumping duties, which are often steep, politically driven, and inconsistently applied.

While these measures hurt US importers and consumers the most, they also significantly heighten uncertainty for exporters. By guaranteeing that Indonesia will not face tariffs exceeding 19% on its exports to the US through 2029, its new agreement with the US seems to mitigate this uncertainty, providing a level of protection against Mr Trump's tariff escalations. Indonesia can now rest assured that it will not face the kinds of extreme tariffs to which China has been subjected.

Indonesia's government argues that such a deal was essential because even though the US accounts for only 9.9% of Indonesia's total exports, the trade relationship is disproportionately important. Indonesian exports to the US — including apparel, footwear, furniture, rubber products, and integrated circuits — are labour-intensive, they note, and thus support a substantial number of jobs.