The End of US-China Trade Tensions and What It Means for Indonesia

In January 2025, the US imposed new tariffs on Chinese goods as part of its push to secure domestic supply chains, reduce dependence on China in strategic sectors (like semiconductors and EV batteries), and address unresolved trade imbalances. China retaliated with duties on American agricultural products, machinery, and technology exports.

While Indonesia was not directly involved in this bilateral dispute, it was caught in the middle—experiencing trade disruptions, weakened investor confidence, and price volatility across key sectors.

However, by May 2025, the narrative began to shift. Amid concerns over inflation, market instability, and pressure from multinational corporations, both countries opened backchannel talks. Early agreements have centered around tariff pauses, expanded market access for non-sensitive sectors, and mutual reassurances on WTO commitments.

This move toward trade peace is still tentative, but it’s enough to calm markets and reset expectations in global trade—particularly for emerging economies like Indonesia.

How the Shift Impacts Indonesian Businesses

1. Stabilization of Trade-Dependent Industries

Indonesia’s economy is deeply trade-linked. Many sectors depend on the import of intermediate goods from China, including:

• Electronics & Semiconductors: Components for smartphones, TVs, and household appliances
• Textiles & Garments: Fabrics and machinery from Chinese suppliers
• Automotive: Spare parts and EV components sourced from China

When tariffs drive up prices or create uncertainty, Indonesian manufacturers bear the cost. With trade tensions easing, production costs may stabilize, and just-in-time logistics can resume more efficiently.

2. Boost for Export-Oriented Sectors

Trade peace could revitalize global demand—especially in the US and China. For Indonesia, this means increased export potential in:

• Palm oil and rubber (for industrial uses)
• Coal and nickel (for China’s growing green energy sector)
• Fisheries and processed food products

Additionally, the easing of US-China tensions could redirect global supply chains toward reliable third-party exporters like Indonesia. Exporters can benefit from being a “neutral” partner in a multipolar trade landscape.

3. Improved Investment Climate

The earlier 2025 escalation caused global investors to become cautious, especially in frontier markets. Now, trade peace brings:

• Increased FDI inflows, especially in manufacturing, mining, and logistics
• Greater interest from multinationals looking to diversify production outside China
• More venture capital activity in digital infrastructure, fintech, and e-commerce

Indonesia, with its young workforce, growing digital economy, and strategic location, stands to benefit—if it seizes the moment.

How Indonesian Consumers Are Affected

1. Price Relief on Imported Goods

Consumers in Indonesia had already begun to feel the pinch of trade war-related inflation:

• Electronics and mobile devices: Dependent on Chinese components
• Automobiles and spare parts: Prices rose due to sourcing issues
• Food products and packaging: Increased global shipping and raw material costs

With tariffs easing and global trade normalizing, these cost pressures may decline, leading to more stable or even lower prices for end consumers.