Trump's Tariff Threatens Indonesia's Labor-Intensive Industries, 1.2 Million Jobs at Risk

April 30, 2025 | 12:39 pm

TEMPO.CO, Jakarta - Director of Center for Economic and Law Studies (Celios), Bhima Yudhistira, believes that the trade war resulting from U.S. tariff policies will have an impact on workers in labor-intensive sectors.

With the decrease in exports of labor-intensive industrial products due to the increase in Trump's tariffs, Bhima mentioned that the risk of layoffs in that sector will become greater.

Bhima highlighted the significant economic risks posed by the recent tariff policy, stating, "Celios's modeling results calculate the decrease in economic output due to reciprocal tariffs to be up to Rp164 trillion.

Meanwhile, the number of jobs is estimated to decrease by 1.2 million people this year," in a written statement issued on Tuesday, April 29, 2025.

As previously reported, U.S. President Donald Trump announced a new wave of import tariff hikes on Wednesday, April 2. The revised policy includes a base tariff increase of up to 10 percent for all products entering the United States.

This development raises serious concerns about Indonesia’s export competitiveness in the U.S. market, as the added tariffs are likely to make Indonesian goods more expensive and less attractive.

Bhima is not alone in expressing concern over the potential rise in unemployment due to Trump's trade measures. Senior Economist at Paramadina University, Wijayanto Samirin, echoed this sentiment.

He emphasized the vulnerability of Indonesia’s exports under the new tariff regime, noting, "Our exports to the U.S. are dominated by labor-intensive industrial products," during a statement made on Thursday, April 3, 2025.

Wijayanto also warned that these tariffs could contribute to a broader economic slowdown. Global financial institutions like the IMF, World Bank, and OECD are expected to revise their economic growth forecasts downward.

He added that investors are likely to shift their capital into safer assets, such as gold and government bonds, in response to rising uncertainty.

In fact, the April 2025 edition of the World Economic Outlook from the IMF reflects this shift.

The IMF downgraded its forecast for Indonesia’s economic growth to 4.7 percent from a previous estimate of 5.1 percent, attributing the adjustment to the escalation of the trade war triggered by U.S. reciprocal tariffs.

Government’s Diplomatic Response

In response, the Indonesian government has initiated diplomatic efforts to ease the impact of the tariff hikes. Coordinating Minister for Economic Affairs Airlangga Hartarto shared that a delegation was sent to the United States for negotiations from April 16 to 23, 2025.

"Indonesia asks for our tariffs to be at the same level as other countries, whether it's Vietnam, Bangladesh, so that we can have an equal level playing field with other countries," Airlangga stated during a press conference at the State Palace on Monday, April 28, 2025.

He noted that the delegation engaged with various key figures, including representatives from the U.S. Trade Representative's office, the Secretary of Commerce, the Secretary of the Treasury, and the Director of the National Economic Council, as well as delegates from several other nations.

Airlangga also conducted virtual discussions with the Foreign Minister of Australia, South Korea’s Minister of Trade and Industry, the Semiconductor Industry Association, the U.S.-ASEAN Business Council, and the US-Indonesia Society.

Among Indonesia’s proposals was an offer to boost investment in the United States through PT Indorama’s US$2 billion Blue Ammonia project in Louisiana. Additionally, the talks covered cooperation on critical minerals and technical collaboration in education and science.

Ilona Esterina, contributed to the writing of this article.

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