The Impact of The US-China Trade War on Indonesia

Abstract

The trade war between the US and China began when Trump announced new import tariffs for all its trading partners on Wednesday, April 2, 2025. The imposition of these tariffs, which were considered reciprocal tariffs, triggered retaliation from various countries, starting a potential trade war. When US President Trump threatened to stop all negotiations with China, Beijing responded with retaliatory measures, such as loosening the RMB exchange rate, which was actually a test of strength in the global economic structure. The impact of the trade war between the US and China is very complex and significant for the world, especially Indonesia. This conflict is not only a dispute between two world giants, but also an earthquake that can shake the foundations of the global trade order. Positive impacts include: (1) Market Diversification Opportunities; (2) The trade war can encourage Indonesia to seek alternative markets, such as countries outside the US and China; (3) Increased Investment; (4) Some companies from the US and China may consider moving their production bases to Indonesia, to avoid high import tariffs; and (5) The trade war can create opportunities for Indonesia to produce and export products previously produced and exported by China or the US. Negative impacts include: (1) Decrease in Mining Exports; (2) Decrease in demand from China and the US causing a decrease in prices and exports of Indonesian mining commodities; (3) Increase in Import Prices; (4) Increase in import tariffs by the US and China causing an increase in the price of raw materials imported by Indonesia, which impacts the production costs of domestic industries; and (5) Uncertainty in the capital and investment markets, which can reduce foreign direct investment into Indonesia.