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Trump 2.0: A roadblock to Prabowo’s 8 percent growth ambition

Trump's stances could have significant impacts on Indonesia’s economic trajectory in the coming years, complicating Prabowo’s ambitious goal.

Deni Friawan (The Jakarta Post)
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Jakarta
Tue, January 21, 2025

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Trump 2.0: A roadblock to Prabowo’s 8 percent growth ambition Facing challenges: President Prabowo Subianto addresses the Asia-Pacific Economic Cooperation (APEC) CEO Summit in Lima, on Nov. 14, 2024. (Presidential Secretariat YouTube channe)

T

he re-election of Donald Trump as President of the United States, often referred to as “Trump 2.0”, has reignited debates about the global economic order, trade policies and geopolitical dynamics. Trump’s return to the White House will renew the focus on the “America First” policy, emphasizing the reduction of trade deficits, reshoring jobs and tightening immigration policies.

These stances could have significant impacts on Indonesia’s economic trajectory in the coming years, complicating President Prabowo Subianto’s ambitious goal of 8 percent growth. Without fundamental changes in Indonesia’s internal and external economic policies to strategically anticipate Trump’s policies, the likelihood of achieving Prabowo’s economic objectives appears slim.

During his first presidency, Trump's America First agenda prominently featured aggressive trade policies and a retreat from multilateral agreements. To prioritize domestic industries and reduce US trade deficits, he imposed high tariffs and various trade restrictions, with a particular focus on imports from China.

In his second term, Trump is expected to continue his aggressive trade policies, with even higher tariffs on Chinese imports and potential tariffs on goods from countries with significant trade surpluses, including Indonesia. He plans to impose tariffs of 60-100 percent on Chinese products and an additional 10-20 percent tax on all goods entering the US.

Following Trump’s previous decision to revoke the US Generalized System of Preferences (GSP) for India and Turkey, his second term may similarly reconsider duty-free access for certain goods from developing countries like Indonesia, which benefited from US$3.56 billion in exports under the GSP program in 2023. The US is also one of Indonesia’s top trading partners, with Indonesia enjoying a notable trade surplus of nearly $12 million in 2023.

The potential imposition of higher tariffs, along with the possibility of losing GSP benefits, could directly undermine the competitiveness of Indonesian goods, such as textiles, footwear and palm oils in the US market, reducing export revenues and posing significant challenges to Prabowo’s growth ambitions.

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Meanwhile, Trump’s aggressive trade policies could further intensify the ongoing US-China trade war and ignite a broader trade conflict, disrupting global supply chains and undermining global economic growth.

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