Indonesia braces for economic slowdown as U.S. tariffs threaten exports, etc

4/4/2025 5:57

Newly announced U.S. tariffs on imported products from Indonesia will likely trigger an economic recession by year-end, as they may hit exports, weaken the rupiah, impact the stock market, and cause layoffs, Indonesian economic experts said on Thursday.

"This could cause a recession in the fourth quarter of 2025," said Bhima Yudhistira, executive director of the Center for Economic and Law Studies.

He projected that the new 32 percent U.S. tariffs would reduce the volume of Indonesia's exports to the United States and could also negatively affect shipments to other countries.

"The automotive, electronics, apparel, and textile sectors will be hit hard," Bhima told local media.

Lukman Leong, an analyst from Doo Financial Futures, said that the rupiah exchange rate is under heavy pressure following the implementation of the tariffs in April.

"Indonesia is facing 32 percent tariffs. The rupiah will remain under heavy pressure as Indonesia is among the countries subject to large reciprocal tariffs," he said.

Leong noted that the U.S. dollar index has been volatile following U.S. President Donald Trump's announcement of a countervailing tariff policy that appears more aggressive than expected.

"The current market sentiment is very negative and risk-off," he added.

To prevent further depreciation of the rupiah against the U.S. dollar, Leong suggested that Bank Indonesia, the country's central bank, should intervene.

Wijayanto Samirin, an economist at Paramadina University, said the tariffs will erode Indonesia's projected 5 percent economic growth, disrupt the stock market, and lead to layoffs.

"Shares of several export-oriented sectors will become increasingly volatile," he noted.

Moreover, Wijayanto warned that the U.S. tariffs will cause job losses in Indonesia, as labor-intensive industries dominate the country's exports to the United States.