President Prabowo Subianto has signaled plans to ease Indonesia’s local content (TKDN) regulations and certain import restrictions as part of a broader trade strategy to negotiate with the United States. The potential relaxation comes in response to recent U.S. tariff hikes on Indonesian exports and is aimed at improving Indonesia’s global competitiveness.

However, Deputy Finance Minister Anggito Abimanyu emphasized that any regulatory loosening would be carefully evaluated and selectively implemented.

“What the president conveyed is in the context of broader evaluation. We are reviewing several non-tariff measures (NTMs),” Anggito said during a public discussion hosted by Kagama at the RRI building in Jakarta on Wednesday, May 14, 2025.

NTMs refer to trade restrictions that are not based on tariff rates, including import quotas, licensing requirements, technical standards, and local content rules. Anggito clarified that not all TKDN regulations would be eliminated, and evaluations would be conducted on a commodity-by-commodity basis.

“This is not about scrapping all TKDN requirements. It will be done selectively. We’ll look at each commodity carefully,” he added.

In support of this policy shift, the government has issued Presidential Regulation (Perpres) No. 46/2025, revising earlier regulations on the procurement of goods and services. “This regulation is a response to U.S. expectations for policy adjustments,” Anggito said.

While discussions over the list of affected commodities are ongoing, the easing of TKDN requirements will be closely linked to adjustments in tariff measures. One notable target is the reduction of most favored nation (MFN) tariffs, bringing them closer in line with free trade agreements Indonesia has with other countries.

“The MFN tariffs will be reduced, aiming for comparative alignment with our existing FTAs,” Anggito said.

On the non-tariff front, the government is preparing a list of measures under review, including technical requirements, import quotas, and domestic content rules. The final policy adjustments, Anggito noted, will consider both industrial competitiveness and domestic value-added objectives.

Strategic response

The proposed regulatory changes form part of Indonesia’s strategic response to the 32 percent reciprocal tariffs imposed by the U.S. under former President Donald Trump’s trade policy framework. Indonesia is seeking to revive the Trade and Investment Framework Agreement (TIFA) with the U.S. and balance trade relations by purchasing strategic American products.

In early April, President Prabowo instructed policymakers to adopt a more pragmatic approach to TKDN rules, arguing that local content performance is closely tied to broader issues such as education, science, and technological capabilities.

“Please revise the TKDN rules. Make them realistic. Domestic capacity and content are broad issues, tied to education and technology. We can’t simply regulate TKDN upwards,” Prabowo said during a national economic forum on April 8, 2025.

The outcome of the ongoing evaluations could reshape Indonesia’s trade architecture and manufacturing policy in the coming years, as the country navigates increasing global protectionism and seeks to maintain its export momentum.