INDEF: Indonesia at Risk of Being "Steered" Following Trade Agreement with the US
Jakarta, Indonesia – The Agreement on Reciprocal Tariff (ART) between Indonesia and the United States has been assessed as potentially narrowing the scope of national economic policy.
Ahmad Heri Firdaus, a researcher at INDEF’s Centre for Industry, Trade, and Investment, contends that the agreement does far more than regulate tariffs. The accord also includes provisions that could influence the direction of domestic industrial, trade, and regulatory policies.
“Our policies are constrained; we are steered. Just making policies, we are constrained. That is quite burdensome. Later, policy space will potentially become even narrower,” he stated during an INDEF online discussion on the costs and benefits of the US-Indonesia trade agreement on Friday, 27 February 2026.
He observes that the agreement’s structure reveals imbalance. Indonesia is reported to have eliminated up to 99 per cent of tariffs on products originating from the United States.
This condition opens the domestic market widely to US import products. Several Indonesian export products still face barriers including quotas, technical standards, and other requirements.
The agreement is also assessed as potentially affecting policy on Domestic Component Level (TKDN). This policy has served as an instrument to strengthen national industry and attract investment.
A number of global investors have adjusted their investments in accordance with TKDN policy.
Heri estimates that the agreement could dampen Indonesia’s export performance. Competition from Vietnam and Malaysia is seen as increasingly fierce because the production cost structure in those countries is more competitive.
Indonesia also faces the potential for increased pressure from imported products, both from the United States and other countries that redirect exports due to changing global trade dynamics.
This pressure could intensify competition in the domestic market and impact domestic industry.
Heri emphasises the importance of export market diversification and strengthening national industry to reduce dependence on particular markets. The government must also ensure that ART implementation does not hinder industrialisation and long-term growth.
“Indonesia needs to strengthen industrial competitiveness, reduce production costs, and expand export markets in order to remain competitive amid changes in global trade policy,” he stated.