Indonesia's Prabowo Asleep At The Wheel On Trump Tariffs

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“Yes, Indo is less exposed to tariffs,” notes Siwage Dharma Negara, co-coordinator for the Indonesia Studies Program at ISEAS.“But its exports contribute to foreign exchange reserves, which will be depleted quickly. We need to anticipate more pressure on the rupiah. This, in turn, will have an adverse impact on its imports of critical inputs and raw materials.”

Facing this difficult situation, Indonesia has reacted like much of ASEAN by quickly looking for a deal.“We will also open negotiations with America. We will say: 'We want a good relationship. We want a fair relationship. We want an equal relationship,'” President Prabowo Subianto told journalists April 7 in his first public comments on the matter.

It seems Indonesia is looking to coordinate with Malaysia or perhaps ASEAN writ large, with Prabowo discussing the matter with Prime Minister Anwar Ibrahim, who currently is the rotational chair of the bloc.

“Not retaliating is the overall strategy from ASEAN countries, hoping Trump will be willing to make exceptions,” explains Dewi Fortuna Anwar, co-founder of the Foreign Policy Community of Indonesia.

“Trump is committed to protect the US market, but like the Godfather he'll likely be more generous to those willing to kiss the ring. As SEA is the epicenter of US-China rivalry, Trump will probably not want to push the region completely into the China orbit. But some kowtowing will be required.”

Trade negotiations could prove tough, though. Trump has signaled resolve to stick to the tariffs despite plunging stock markets and his goals seem quixotic, if not unreachable. Speaking to reporters recently, Trump said he would not strike any deal to cut tariffs unless it also eliminated the US trade deficit with that country.

Meanwhile, Indonesia's chaotic governance may leave it struggling to deal with the extremely difficult task of managing both the domestic economic fallout and trade negotiations with the US administration.

Notably, Indonesia does not currently have an ambassador in Washington DC and has not had one for two years. Speaking off the record, senior civil servants talk of entrenched dysfunction at the foreign ministry.

Speaking with a now-retired veteran diplomat, this writer commented that Indonesia seemed to have been caught with its pants down on the tariff announcement.“If any pants all,” came the dry reply.

Part of the problem is that President Prabowo fancies himself an international statesman, spending roughly one-third of his first 100 days on marathon trips abroad, mostly to attend summits.

As foreign minister, instead of the veteran diplomat, Prabowo appointed his extremely inexperienced aide Sugiono – a move widely seen as meant to allow Prabowo to dictate foreign policy to a junior who is dependent on him.

The result has been disorganization internally and embarrassing botches externally. Most notably, Indonesia seemed so desperate for new deals with China that it briefly appeared to acknowledge China's claims to Indonesian territorial waters soon after Prabowo's inauguration. None of this augurs well for managing Trump.

As for domestic economic policy, Indonesia was starting to struggle economically well before the tariff announcement, in large part due to erratic policymaking.

Structural factors like weakening consumer spending and a rupiah hitting lows last seen during the pandemic have been exacerbated by fears about the government's populist spending policies.

The government has slashed huge swathes of the state budget to channel money into a school meals program. And a new holding company for state-owned enterprises (SOEs) that lacks parliamentary scrutiny and reports to the president has sparked fears of a 1MDB like-scenario.

The result has been foreign capital flight at alarming rates. A market crash in mid-March saw trading briefly suspended on Indonesia's stock exchange.