The Business Competition Supervisory Commission (KPPU) has raised concerns over the economic impact of the United States' new 32 percent reciprocal import tariff on Indonesian goods, warning that the policy could severely disrupt domestic competition and threaten small and medium enterprises (SMEs).

In a statement accessed on Thursday, May 8, 2025, KPPU Vice Chairman Aru Armando said that the tariff imposed by U.S. President Donald Trump's administration on Indonesia and several other ASEAN countries could cause significant shocks, particularly to export-driven sectors and local SMEs. He emphasized the need for a coordinated response between the Indonesian government and KPPU to mitigate the adverse effects.

KPPU identified four key impacts of the tariff policy. First, the high U.S. tariff weakens the competitiveness of Indonesian exports − such as palm oil, textiles, footwear, electronics, rubber, and coffee − which now face steeper price disadvantages compared to products from countries like Malaysia, where tariffs are lower at 24 percent.

Second, domestic markets may face oversupply and an influx of cheap imported goods, particularly as export demand declines. KPPU warned this could lead to falling local commodity prices, harming farmers and SMEs. Moreover, Indonesia risks being flooded with Chinese products − ranging from electronics to steel − diverted from the U.S. market due to similar tariff barriers, with potential market values reaching US$221.6 billion. This scenario raises concerns about predatory pricing strategies.

Third, industries reliant on U.S. exports may reduce production and lay off workers due to declining orders, potentially leading to factory closures and increasing vulnerability to foreign acquisitions. KPPU stressed the urgency of monitoring mergers and acquisitions, urging closer coordination with key institutions including the Ministry of Law, the Ministry of Industry, the Financial Services Authority (OJK), and the Indonesian Central Bank (BI).

Finally, KPPU criticized proposed government responses − such as increasing U.S. imports and relaxing local content requirements − for potentially undermining domestic producers. The agency recommended strategic actions, including optimizing KPPU’s role in supervising anti-competitive practices, tightening oversight of import flows, and offering legal flexibility for affected exporters.

“SMEs are the frontline of Indonesia. If we don’t protect them today, tomorrow we’ll just be spectators in our own home,” Aru said.

KPPU also called for its inclusion in cabinet meetings and strategic coordination forums to ensure economic policies remain aligned with fair competition principles.