By: Eko B. Supriyanto, Editor-in-Chief of Infobank Media Group
Whether this is good news or bad news remains to be seen. The announcement that Indonesia has agreed to set a reciprocal tariff of 19 percent with the United States (US). This figure is lower than the 32 percent set on April 2, 2025—and has been welcomed as a diplomatic victory. US President Donald Trump stated that this agreement “opens up the entire Indonesian market to the US for the first time in history.” Plus, Indonesia will be willing to buy energy, agricultural products, construction and engineering, and provide many incentives for US products.
Should we applaud this tariff reduction? It should make the Indonesian people ask, whose history is being rewritten like colonizers in colonial times? But who dares to question this unbalanced agreement out loud?
On the surface, the tariff reduction does seem like an achievement. However, when looking at the tariff map in Asia, that pride quickly turns into big questions. Our 19 percent rate is the same as Cambodia, Thailand, and Malaysia. But look at the exceptions. Bangkok and Kuala Lumpur get the “red carpet” treatment for aerospace products, pharmaceuticals, and key commodities such as palm oil, cocoa, and rubber.
It’s even more striking. Look at India, with all the complexities of its domestic market, which is only subject to 18 percent. Japan, South Korea, and Taiwan—industrial giants with high value-added products such as automobiles and semiconductors—are only subject to 15 percent. Clearly, this is no longer a matter of a 1-4 percent difference.
This could be a matter of concession structure. Those with high bargaining power due to critical industries can lobby for “concessions.” So, what is Indonesia’s main bargaining chip? Is it merely “market access,” which has actually been in place all along?
The romanticism of “opening up the market” clearly reminds Indonesia of colonial-era trade practices. Colonies were markets for the industrial products of the central state. The phrase “free of tariff and non-tariff barriers” for US products, if not read carefully, could be a “blind” opening of the door.
Indonesia may be witnessing small and medium industries that are still learning to walk. Domestic industries that are inefficient due to numerous levies must be prepared to compete with imported products in their own “backyard” without any barriers.
In fact, the Indonesia-US agreement is like dismantling the fence that has protected thousands of small and medium-sized businesses and cooperatives. Imagine, US agricultural products, which have been protected by huge subsidies in their country, can enter the domestic market without significant barriers. Indonesian corn, soybean, or dairy farmers are not only competing with local farmers. They are also competing with the US agricultural industry, which is funded by a superpower.
Then what will happen to local manufactured products? When US consumer goods flood the market with economies of scale that Indonesian entrepreneurs cannot match. Clearly, it is not just profits that will be eroded, but production capacity could also die. Obviously, this is not a matter of 19 percent or 15 percent tariffs. Rather, it is a matter of how small industries that manufacture footwear, garments, or electronic components must compete.
In fact, they are competing on an uneven playing field with imported finished goods that are suddenly cheaper and easier to import. This brings to mind a classic economic lesson: opening up the market without industrial readiness is tantamount to inviting premature deindustrialization.
In fact, deindustrialization will have a huge impact on employment. It is possible that many domestic industries will lay off many of their employees because the “fence” has been opened wide for products from the US.
The Latent Danger of the Payment System
Not only that. When it comes to the financial system, this agreement also opens up the service sector, including financial services such as Visa and Mastercard. On the surface, this is about ease of transaction. But in terms of political economy, it is clearly a matter of data sovereignty and control of financial infrastructure. When the payment system is dominated by one or two foreign companies, the flow of transaction data from 280 million Indonesians—a precise picture of our consumption behavior, preferences, and economic footprint—will flow to data centers abroad.
That is the latent danger that cannot be seen. The rule is, whoever controls the data controls the market. With full access to the financial system, companies such as Visa are not only a “payment tool,” but can also become market policy makers. They can map out which segments are most profitable for imported products, then provide that data to their parent companies.
Meanwhile, our national banks and local payment systems (such as the National Payment Gateway) must share the “kitchen” with much larger foreign players. This is no longer just business competition; it is a battle for control of the digital economy architecture. Indonesia does have QRIS, but the return of Visa and Mastercard with all their freedom will certainly change the domestic payment system landscape.
Trump’s Transshipment Threat
In the Indonesia-US agreement, Trump’s threat regarding transshipment (re-shipping of goods) is also not a trivial matter. Clearly, this is a vague clause that could become a nightmare. Under the pretext of preventing Chinese goods from entering through Indonesia, the US has given itself the right to unilaterally raise tariffs at any time if it feels there has been “cheating.” Clearly, this is not an equal partnership. It is like having one party, Uncle Sam, act as both referee and player.
So don’t rush to applaud. The US-Indonesia agreement (19 percent) is a double-edged sword. Lowering tariffs is indeed important in this era of global trade wars. However, the price Indonesia is paying is too high. In fact, it is clear that Indonesia has traded away the protection of its small industries and the potential control of its financial data, as well as its regulatory sovereignty, for the promise of an uncertain export market.
In fact, this is an economic policy choice that must be continuously monitored. Indonesia must not fall back into the romanticism of colonial-style “open markets.” Even worse, where this country becomes nothing more than a place to sell products. Meanwhile, the domestic industry is slowly dying, and Indonesia’s financial system has become a “haven” for foreign data. Who cares about all that now? Unfortunately, the public is often made to applaud. And it has become rare, even frightening, to ask questions about many issues—for whom, exactly, were those agreements made? (*)
