USTR Imposes 10% Tariff on Indonesia – Government Lobbies for Competitive Treatment
The Indonesian government has confirmed it will continue negotiations with the United States after the USTR imposed an additional 10% tariff on a number of Indonesian products. The tariff is the result of a Section 301 investigation under the Trade Act of 1974 concerning alleged forced labour practices in global supply chains. Indonesia is among 16 countries subject to the 10% tariff, alongside Malaysia, India, Mexico, Canada, and the United Kingdom. Despite this, the USTR acknowledged that Indonesia has a commitment and regulatory framework to prevent forced labour. A number of Indonesian products remain on the product exemptions list, though specific details of the products and exemptions have not been fully announced. The government is currently awaiting the results of a USTR investigation into excess capacity in the manufacturing sector, which will be announced in the near future.
Indonesia hopes the decision will provide more favourable treatment, including maintaining exemptions for products that previously obtained facilities through the ART agreement. To maintain export competitiveness, the government plans to simplify raw material import regulations to reduce production costs, while optimising the implementation of existing trade agreements such as IA-CEPA, IK-CEPA, and RCEP. The government is also accelerating the completion of new trade agreement negotiations, including the I-EAEU FTA, IEU-CEPA, and ICA-CEPA. Domestically, pressure on the rupiah and fiscal conditions form the backdrop that reinforces the urgency of this policy. Current market data shows the rupiah at Rp17,935 per US dollar and the Jakarta Composite Index at 6,196, an area reflecting high external uncertainty.
Brent crude oil prices at $91.37 per barrel add to the burden of energy import costs and subsidies. The state budget deficit, which has reached Rp240 trillion as of March 2026, limits fiscal space for additional stimulus. Amid this situation, the risk of declining export revenues due to the new tariffs could widen the current account deficit and pressure foreign exchange reserves. The tariff is not merely a short-term trade barrier; it signals a shift in US strategy using labour issues as an instrument of commercial policy. Indonesia, with the complexity of worker issues in the palm oil, mining, and garment sectors, risks facing further investigations. If not handled with lobbying and credible reform, tariff uncertainty could permanently erode the competitiveness of Indonesian exports in the US market and trigger a supply chain shift to competing countries such as Vietnam or India.