Indonesia-US Trade Agreement Poses Risk of Retaliation
An economist from the Faculty of Economics and Business at Gadjah Mada University (UGM), Rimawan Pradiptyo, has raised concerns regarding the signing of an Agreement on Reciprocal Trade (ART) between Indonesia and the United States. He contends the agreement is unbalanced, with Indonesia bearing the greatest burden whilst the United States obtains most of the benefits.
“This is the first time in my career dealing with an agreement like this, or rather a decision that violates the preamble of the 1945 Constitution,” Rimawan stated during a national seminar held online via Zoom on Saturday, 14 March 2026.
Rimawan believes that if the ART takes effect, Indonesia risks encountering problems with other nations. One possibility is legal action through the World Trade Organization (WTO). Additionally, other countries could retaliate or take retaliatory measures, viewing Indonesia as granting special treatment to the United States.
He revealed that the trade agreement contains three clauses protecting the US position, whilst Indonesia lacks comparable protective clauses. This situation, according to him, could lead to legal problems, including potential violations of Articles 5 and 11 and the preamble of the 1945 Constitution.
Rimawan believes implementing the reciprocal trade tariff agreement could require the government to adjust numerous domestic regulations. Such adjustments, he noted, could encompass changes or creation of new regulations at various levels, ranging from legislation to government regulations, presidential decisions, financial services authority regulations, central bank regulations, and ministerial regulations.
During the discussion, Rimawan acknowledged difficulty in theoretically modelling the policy’s impact. He contends that ART provisions requiring Indonesia to open employment and investment opportunities in the United States are difficult to explain using standard economic models.
He also questioned provisions stating the Indonesian government must facilitate domestic companies to purchase goods from the United States. According to Rimawan, purchasing decisions are typically determined by company needs and capability. If a company does not require such goods, the question arises whether the state would still face sanctions.
Regarding the threat of additional tariffs up to 10 percent in the reciprocal trade agreement, he stated this places Indonesia in an increasingly difficult position. Each implementation stage of the agreement potentially carries sanctions threats if requirements are not met.
Furthermore, Rimawan perceives the relationship pattern in the ART could compel Indonesia to follow US trade policies. In other words, if the United States implements specific trade policies against other nations, Indonesia might be pressured to take similar action even if previously having no conflict with those countries.
According to Rimawan, such a situation could also provoke reactions from other nations, viewing Indonesia as granting privileges to the United States. He emphasised this risk requires attention given Indonesia’s position as a small open economy, which is more vulnerable to external pressures than large nations such as the United States.