UI Economist Calculates US Trade Diversion Potential to Indonesia Reaching $7.11 Billion
JAKARTA – Fithra Faisal Hastiadi, an economist at the University of Indonesia and Senior Technical Expert at the Government Communication Board of the Republic of Indonesia, has projected that potential trade diversion from the United States to Indonesia could reach $7.11 billion.
This phenomenon emerges because reciprocal tariffs on Indonesian products are lower than those imposed on competing nations. This condition incentivises importers in the United States to switch to Indonesian-sourced products.
“Economically we benefit, because these countries have significantly higher tariffs, for example Brazil and China. There is trade diversion potential. So in economic terms we gain,” said Fithra Faisal Hastiadi in Jakarta on Friday (27 February 2026).
“This is not a government calculation, it is my calculation, disclaimer. So for the manufacturing sector, Indonesia could obtain benefits from trade diversion of around $3.38 billion,” he explained.
The manufacturing sector stands to contribute approximately $3.38 billion. The textile sector is estimated to gain $2.22 billion. The agriculture sector could add $1 billion.
The trade agreement also creates opportunities for mutual recognition of standards. This scheme encompasses health assurance standardisation and halal certification.
Fithra believes the high standards of the US Food and Drug Administration could strengthen food and drug safety oversight in Indonesia.
US products already certified by the Food and Drug Administration would no longer need to obtain re-licensing from Indonesia’s Food and Drug Supervisory Agency. The same applies to products already holding halal certification, for instance from the USA Halal Chamber of Commerce.
Indonesia’s participation in BRICS also creates opportunities. Many BRICS members face high tariff burdens from the United States. This condition drives trade diversion flows towards Indonesia.
The United States now positions Indonesia as a primary alternative supply chain base.
Fithra cited that benefits from bilateral cooperation are becoming evident from US investment commitments. These investments flow towards semiconductor technology development and rare earth metal processing.
“When the US invests in semiconductors, it means we can also build that ecosystem. So when we export from that ecosystem it also serves our own interests,” said Fithra Faisal Hastiadi.