August 6, 2025 | 12:04 pm
TEMPO.CO, Bandung - Indonesia's Coordinating Minister for Economic Affairs Airlangga Hartarto said tariff negotiations with the United States, which resulted in a 19 percent reciprocal tariff, helped prevent mass layoffs affecting up to 5 million Indonesian workers.
“It’s clear that with a 32 percent tariff, 5 million people could face layoffs. So if it’s 19 percent, the 5 million layoffs wouldn’t happen. The difference is clear,” Airlangga said at the Apindo National Coordination Meeting press conference in Bandung on Tuesday, August 5, 2025.
Airlangga explained that the risk of large-scale layoffs emerged when the United States considered imposing a 32 percent reciprocal tariff.
“Previously, the tariff wasn’t zero. Before President Donald Trump’s policy, Indonesia’s tariff was around 10-20 percent. So when the U.S. planned a 32 percent tariff, that essentially meant ‘no trade,’” he said.
“But now, with the agreed 19 percent, we are one of the competitive countries in ASEAN.”
In his opening remarks at the Apindo event, Airlangga discussed the ongoing tariff negotiations. He said most ASEAN countries were hit with a 19 percent tariff, except for Vietnam at 20 percent and Singapore at 10 percent, thanks to its free trade agreement with the U.S.
“We can see that America’s reciprocal tariff applies to almost all ASEAN countries at 19 percent, Vietnam at 20 percent, and Singapore at 10 percent,” he said.
Airlangga added that Indonesia still has competitive opportunities, especially as the U.S. agreed to zero-percent tariffs on certain key commodities.
“Some commodities are set at zero, such as palm oil, rubber, and cocoa. America will accept these products with no tariff,” he said.
"We’re also negotiating lower tariffs for goods from free trade zones like Batam, most of which are components used by American manufacturers.”
He also highlighted the broader economic impact of global tariff wars, including the lengthening of trade cycles.
“External challenges like tariff wars have caused longer trade cycles. Previously, payments would be completed in three months. Now, only 60 percent of payments are settled in that time,” he said.
“To address this, we’re encouraging companies—through Apindo—to return to using Letters of Credit. Without them, transfers get delayed. We’re monitoring this closely with Bank Indonesia.”
Airlangga mentioned several international trade agreements the government is pursuing to unlock new markets.
“The government continues to open access to new markets through various international agreements and remains committed to multilateralism through participation in economic blocs,” he said.
He cited the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) as a key example.
“With the EU, the entry cost for European goods is zero, and our goods also enter Europe with zero tariffs,” he explained.
Airlangga noted that the EU presents a promising market for Indonesian garment products but stressed the need to accelerate textile factory modernization.
“For the textile industry, we’ve provided a five-year credit with a 5 percent subsidized interest rate. But implementation remains limited, so we may need to extend the program another six months,” he said.
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