There are storm clouds forming over Asia, and they’re blowing in from the US. But for Indonesian business, it’s largely a case of “keep calm and carry on” amid the looming threat of trade tariffs under Trump 2.0.
Trump hates trade deficits with a vengeance, and that’s bad news for Indonesia. While the country has narrowed its trade surplus with the US, it was still $17 billion in 2023, and nearly a third higher in 2022.
Trade wars are a core part of the Trump formula. He’s hinted at slapping 10-20% tariffs on all goods entering the US – with an even higher tariff of 60-100% for goods from China. That’ll be a big shift for Indonesian exporters, who have so far only faced tariffs from Washington targeting specific products like biodiesel and steel.
Business as usual
Still, not every business owner in the archipelago thousands of miles away from US soil is losing sleep over what Trump has in store. At least, not yet.
For Yann Schuermans, founder and chief executive of supply chain startup Baskit, it’s not the tariffs so much as the lack of certainty that’s bugging him. “It’s business as usual for us. I’m not doing anything specifically in reaction to Trump’s policies,” Schuermans says.
Baskit was founded in 2022 to tackle Indonesia’s often ineffective traditional distribution chains, which are filled with middlemen and lack data visibility. Today, the company helps more than 200 wholesalers and retailers to monitor their supplies digitally and distribute them worldwide.
The small and medium-sized enterprises that Schuermans works with are relatively shielded from the crossfire between Washington and Beijing, as their products usually fill a niche not found in the US. As such, Schuermans feels pretty confident that consumers there will still be prepared to pay a little extra for the products if the tariffs do come in.
These are uniquely Indonesian products such as cassava chips and tempeh, a fermented soybean product usually used as a meat substitute. “We’re not trying to sell cheaper versions or competitive pricing products that are meant to undercut US manufacturing in any shape or form,” Schuermans adds.
But Indonesian authorities are a bit more wary of the impacts. “Of course, with [tariffs], there will be an impact, both on trade with America and with China,” Fajarini Puntodewi, the head of trade policy agency at Indonesia’s trade ministry, told state news agency Antara. “These two countries are Indonesia’s main trading partners.”
The China angle
While Schuermans may be relatively relaxed about Trump’s tariffs, he’s concerned that the protectionist noises coming from Washington could lead to fewer investments from the US in the region – a view that Josua Pardede, chief economist at Bank Permata, shares.
“Increased US tariffs could potentially limit capital inflows, despite Indonesia’s relatively positive economic outlook,” says Pardede.
And with the US and China closing their markets to each other, China may find other countries to dump its products in. That’s already happening in the pet food sector, according to Stephani Herman, co-founder and CEO of pet food company Compawnion.
“In the pet food industry, the biggest market for Chinese manufacturers is the US and the second one is Europe,” she says. “In 2024, we have seen how Chinese companies eyed Southeast Asian countries, mostly Indonesia, and how they’re actually wanting to distribute their brands here.”
A flood of cheap imports would undercut domestic industries, which was why Vietnam and Indonesia banned Chinese online retailer Temu earlier this year.
Indonesian textile giant Sritex, which hires 50,000 people, was declared bankrupt in October this year after cheap imports, a slump in demand and woes from the pandemic era led to heavy debts. It was chaotic enough for the Indonesian president to intervene and call for a rescue plan.
Read more: A tech winter? Not in tropical Indonesia, says VC firm East Ventures
The way out is in
Due to Indonesia’s massive size – an archipelago of more than 17,000 islands, spanning three time zones – it’s hard enough for local businesses to distribute their products domestically, before they even start to think further afield.
So China and the US are generally distant afterthoughts for most local businesses, the vast majority of which are small and medium-sized enterprises.
Willson Cuaca, co-founder and managing partner at VC firm East Ventures, thinks Indonesian entrepreneurs should focus on the massive domestic market of 280 million people on their doorstep.
“To all Indonesian startups, we told them not to go anywhere, focus only on Indonesia first. The market here is huge,” he tells MONIIFY.
“You will lose focus if you expand abroad too early. Other people would come and take (our market).”
But even startups with big ambitions to scale abroad, like Herman’s Compawnion, aren’t too worried about Trump’s second coming.
Be nimble
The East Ventures-backed startup works with Baskit to distribute its products to local pet shops and is considering exporting its products to other Southeast Asian countries. Herman believes that the only direct impact from Trump’s policies to her business would be currency volatility.
“Our financial statements are in US dollars, so the fluctuations will somehow impact our accounting. We might have good growth in Indonesia, but the currency changes would make it seem like our company is not growing,” she says. But that would only really be a minor inconvenience, she says.
