The Impact of US Reciprocal Tariffs on Indonesia's Automotive Industry

KatadataOTO – Not long ago, United States President Donald Trump announced a new policy, namely reciprocal tariffs.

In short, a reciprocal tariff is a mutual policy, where one country sets import tariffs on goods from another country similar to those imposed by that country on its exports.

Indonesia is one of the countries affected by the 32 percent reciprocal tariff as of April 9, 2025.

This decision will affect various industries in Indonesia, not least in the automotive sector.

Photo : KatadataOTO

Nevertheless, observers assess that Indonesia's main automotive product exports to the United States are not significantly large.

“Our automotive market share is in the Philippines, Saudi Arabia, Mexico, Vietnam, and the United Arab Emirates. Perhaps our exports to these countries will decrease, due to their economic downturn,” said Riyanto, an automotive observer from LPEM (Institute for Economic and Social Research) UI when contacted by KatadataOTO, Monday (07/08).

On the other hand, associations like Aismoli (Indonesian Electric Motorcycle Association) believe that other countries like China will seek alternative markets outside the US.

Indonesia could be one of the targets, as it has a large population and is considered to have strong purchasing power.

So there is a chance that domestic manufacturers will have to compete with an influx of imported goods.

“To overcome this, we should boost our domestic market, which still has great potential if given stimulus,” said Riyanto.

He emphasized that incentives or subsidies in the form of a reduction in PPnBM (Luxury Goods Sales Tax) or PPN (Value Added Tax) are still a solution worth considering.

Government Responds to US Reciprocal Tariffs

Indonesian President, Prabowo Subianto is said to be sending an envoy to conduct equal and fair negotiations to address the US reciprocal tariffs.

Photo : Neta Auto Indonesia

Prabowo emphasized that the US decision to apply reciprocal tariffs is intended to protect industrial growth there.

Therefore, Indonesia will also take similar steps so that the interests of the nation's people can continue to be met.

“The American leader prioritizes the interests of their people, we also think about our people. There is no need to be disappointed, no need to worry, we believe in our own strength,” said Prabowo Subianto in a live YouTube broadcast from the Presidential Secretariat on Monday.