The issue is significant because trade tensions between the world's two largest economies can quickly spread beyond Washington and Beijing. Higher tariffs can disrupt supply chains, change the direction of international trade and weaken demand in major markets. For Indonesia, the consequences are mixed. The country faces weaker export prospects while also becoming a potential destination for Chinese products redirected away from the US market.
Karso's article notes that China's exports to the United States fell 35% in May 2025 compared with the same period in 2024. At the same time, China's total exports increased by 4.8%, while imports declined by 3.4%. Much of the increase in Chinese exports was directed toward Southeast Asia and the European Union. Thailand, Vietnam and Indonesia were identified as among the leading destinations, accounting for a combined 14.8% of the export value discussed in the article.
For Indonesia, this creates a complicated situation. Chinese goods entering the Indonesian market can increase competition for domestic producers. At the same time, Indonesian businesses can potentially benefit from changes in global supply chains as companies look for alternatives to production concentrated in China.
How the study examined the issue
Rather than conducting a field experiment or survey, Karso used an online data and document review approach. The sources included books, magazines, academic journals, theses, dissertations, online news reports, websites and expert sources related to US-China tariffs and Indonesia's economic strategy.
The article combines these sources with discussions of international trade, geopolitical developments and Indonesia's policy options. The paper does not specify a single fieldwork period; instead, it analyzes developments and sources covering different periods, particularly information available through 2025.
One important episode discussed in the article was the US-China negotiation process in Geneva in May 2025. According to the paper, the two sides agreed to temporarily reduce tariffs for 90 days. US duties on Chinese imports fell from 145% to 30%, while Chinese tariffs on US imports fell from 125% to 10%. The temporary reduction was presented as a pause in the conflict rather than a permanent solution.
Why the trade war matters to Indonesia
The article cites earlier analysis from the Institute for Development of Economics and Finance (INDEF), which projected that Indonesia's exports could decline by 0.24% as a result of the trade war. The paper contrasts this with Vietnam, where exports were projected to increase by 2.58%, as well as smaller positive effects projected for Malaysia, Singapore and Thailand.
The broader global consequences are also substantial. The article cites OECD projections that global trade growth could fall to around 2%, while prolonged US-China tensions could slow investment and economic expansion. Although several of these figures refer to the 2019 trade-war period, Karso uses them to illustrate how trade disputes between major economies can generate effects far beyond the countries imposing tariffs.
The paper also highlights China's control over critical minerals and rare-earth materials. Restrictions on these resources can affect industries such as automobiles, semiconductors and defense because modern manufacturing depends on reliable access to strategic raw materials.
Three strategies proposed for Indonesia
Karso identifies three major directions associated with Indonesia's response under President Prabowo Subianto.
First, Indonesia needs to expand its global trading partners. The article points to Indonesia's participation in and engagement with various international economic arrangements, including BRICS, the Regional Comprehensive Economic Partnership (RCEP), and other bilateral and multilateral trade agreements. The strategy is designed to reduce excessive dependence on individual markets.
Second, Indonesia should accelerate natural-resource downstreaming. Instead of relying primarily on exports of raw materials, Indonesia can increase the value of its commodities through domestic processing and manufacturing. The article gives nickel as an example, noting that the export value of nickel and its derivatives increased from US$3.7 billion in 2014 to US$34.3 billion in 2022.
The paper also discusses the establishment of the Danantara Investment Management Agency (BPI) in February 2025 as an instrument intended to support strategic downstream projects involving minerals, coal, oil and gas, plantations, fisheries and forestry.
Third, Indonesia needs stronger domestic consumption. Karso argues that a resilient domestic market can provide an additional buffer when international demand becomes uncertain. The article highlights government programs such as Free Nutritious Meals and the planned development of 80,000 Red and White Village Cooperatives. Household consumption is described as contributing approximately 54% of Indonesia's GDP, making domestic demand an important pillar of economic resilience.
What the findings mean for Indonesia
The central message is that Indonesia should not rely on a single export market or wait for the US-China dispute to end. A more resilient economy requires several sources of strength at the same time: wider international trade relationships, greater domestic value creation and stronger consumer demand.
For businesses, diversification can reduce exposure to sudden tariff changes in major markets. For industries based on natural resources, downstream processing could create higher-value products and potentially more employment. For policymakers, strengthening domestic consumption could provide an economic cushion when global trade slows.
Karso also cautions against responding too hastily to tariff negotiations. His analysis suggests that Indonesia's position should be guided by its national interests and broader economic strategy rather than simply seeking a rapid agreement with the United States.
About the author
A Junaedi Karso is affiliated with the Government Study program, Universitas Muhammadiyah Makassar. The published article identifies him as the corresponding author. The source does not state an academic degree or provide a more detailed professional biography, so those details cannot be added without an independent source.
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