Economists Warn of Layoff Risks in Indonesia Amid Trump's Trade Tariffs

TEMPO.CO, Jakarta - United States President Donald Trump's new tariff policies have caused concern among several economists in Indonesia. The basic import tariffs, as well as reciprocal tariffs set by the regulators from the Red and White countries, could have a negative impact on the economy and even the labor sector.

The Institute for Development of Economics and Finance (INDEF) revealed that Indonesia's export market share to the U.S. reached 10.3 percent annually, making it the second largest after Indonesia's exports to China.

The Head of the Industrial, Trade, and Investment Center at INDEF, Andry Satrio Nugroho, stated that Trump's new import tariffs could affect the fate of millions of domestic workers. Exporters of leading commodities, such as textiles, footwear, electronics, furniture, and agricultural products, will face high costs. Moreover, over 30 factories in the textile sector and its derivatives have closed in the past three years.

"If the government remains silent, we will not only lose our main market, but will also face a much larger wave of continued layoffs," said Andry in a written statement on Thursday, April 3, 2025.

Trump announced the import tariff policy on Wednesday, April 2. He imposed a minimum tariff of 10 percent on all products entering the U.S. from all countries. The U.S. will impose a 32 percent tariff on imported commodities from Indonesia, ranking it eighth for the highest tariffs received.

Additional reciprocal tariffs, which are now set higher according to Trump, are described as a response to several trading partner countries, including Indonesia. The added tariffs are expected to cause Indonesian exports to the U.S. to decline.

In line with Andry, Syafruddin Karimi, an Economics Department Lecturer at Andalas University, mentioned that Trump's 32 percent tariff will drastically reduce the competitiveness of exports, especially in labor-intensive sectors. Products like fabrics, furniture, and footwear depend heavily on competitive prices in the U.S. market.

"These high tariffs will raise selling prices, prompt buyers to turn to other countries, and trigger the risk of mass layoffs domestically," he said.

If Trump's policy is slow to respond to, he said, Indonesia's potential contraction of exports will directly impact the retail sector. "Yet, the non-oil and gas export sector is one of the main pillars of economic growth and job creation," said Syafruddin.

Wijayanto Samirin, an economist from Paramadina University, also stated that Trump's trade tariff regulations will affect Indonesia's economic growth. He even mentioned that this year's economic growth target is no longer realistic. The condition could become critical after being hit by new U.S. regulations.

"Considering our exports to the U.S. are dominated by labor-intensive industrial products such as shoes, textiles and textile products, rubber products, and electrical and electronic goods," said Wijayanto. "The pressure for layoffs will become stronger."

In an official statement, quoted from the official White House website on April 2, 2025, Trump revealed his reasoning, calling out other countries for taking advantage of the U.S. 

Indonesia and Brazil, according to Trump, are declared to have higher import duties for ethanol than the U.S. Trump, who officially returned to the White House towards the end of January, also highlighted Indonesia's Domestic Component Level (TKDN) policy, import licensing, and foreign exchange from natural resource exports (DHE SDA) imposed by Indonesia.

According to the White House fact sheet, Indonesia maintains local content requirements across commodities for many sectors, a complicated import licensing regime. Indonesia required natural resource companies to retain export earnings in the country for transactions amounting to US$250,000 or more.

Sultan Abdurrahman contributed to the writing of this article.

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