President Prabowo Subianto has opted to pursue for diplomatic settlement against the 32-percent import tariff imposed by the United States on Indonesia, instead of retaliating with a similar policy. 

The Indonesian president emphasized the importance of fair and equal bilateral relations in responding to the U.S. government’s trade policy.

"We will open negotiations with America. We will saythat we want good relations. We want fair relations. We want equal relations," Prabowo said while officiating a rice harvest event in Majalengka, West Java, on Monday, April 7, 2025.

He cited that the government will send a high-level delegation to Washington to negotiate a way out of the tariff policy which is considered detrimental to the national export industry.

Indonesia, according to the plan, will increase imports from the U.S. as part of the negotiation offer. This includes the purchase of components for a strategic oil refinery project and the possible easing of local content rules for U.S. technology and communications companies.

Amid trade tensions, Coordinating Minister for the Economy Airlangga Hartarto maitained that the fiscal posture has not changed. The government is targeting economic growth of 5.2 percent in 2025, up from the 5.03 percent projection this year, with the budget deficit maintained at 2.53 percent of GDP.

The U.S. is currently Indonesia's third largest trading partner, with exports reaching US$26.3 billion in 2024. Indonesia's trade surplus with the U.S. was recorded at US$16.8 billion.

Electronics, textiles, and footwear are the main export commodities that are potentially directly impacted by U.S. tariff policies. The government has emphasized that it will provide support for labor-intensive industries that are the backbone of national employment.

BI’s intervention

These tensions have exacerbated pressure on domestic financial markets. The rupiah exchange rate has plunged to its lowest point since the 1998 monetary crisis. On Monday, April 7, 2025, the rupiah was recorded to have penetrated the level of Rp17,200 per U.S. dollar. Meanwhile, the main stock index was eroded by 7.1 percent throughout March.

The Indonesian Central Bank (BI) has responded by suggesting that it would conduct “aggressive intervention” in the domestic foreign exchange market when it reopens on April 8, following the national holiday for Idul Fitri since March 28.

This measure is expected to dampen turmoil in the financial market which has been influenced by foreign capital outflows and negative sentiment over global trade policies that are unfriendly to developing countries.