The Impact of the America-China Trade War on the Indonesian Economy

Abstract

The escalation of the trade war between the United States and China from 2018 through 2025 has created structural shocks that have forced Indonesia to reassess its national economic resilience strategies amidst shifting global geopolitics. While the conflict has provided opportunities through increased manufacturing export penetration into the U.S. market as a substitute for Chinese products, Indonesia continues to face severe pressure from declining demand from its primary trading partners and a slump in global commodity prices, which has slowed national economic growth. This vulnerability is further exacerbated by the domestic industry's massive dependence on raw materials from China and the depreciation of the Rupiah, which has significantly increased production costs. Furthermore, Indonesia's inability to optimally capture the potential for foreign investment relocation compared to other ASEAN nations highlights an urgent need for reforms in logistics costs and bureaucracy, while tensions in the South China Sea demand a strengthened maritime defense posture to safeguard trade route sovereignty. Consequently, Indonesia requires strategic solutions through a Whole-of-Government approach, encompassing accelerated industrial downstreaming and export market diversification to non-traditional regions, in order to transform trade war challenges into a momentum for more competitive and resilient economic independence.