Jakarta. The Indonesian Employers Association (Apindo) warned that US plans to impose a 32 percent tariff on Indonesian goods could trigger mass layoffs, rupiah volatility, and other major economic challenges if Jakarta fails to secure a deal with Washington.

Ajib Hamdani, an economic policy analyst at Apindo, said the business group has mapped out worst-case scenarios should the tariffs take effect in August 1, identifying four key risks for Southeast Asia’s largest economy.

“The worst potential impact of the US tariff policy is the threat of mass layoffs, especially in labor-intensive sectors, as most of Indonesia’s exports to the US come from these industries,” Ajib said in an interview with Beritasatu TV on Monday.

Higher tariffs could dampen demand for Indonesian products among US buyers, forcing factories to scale back production and cut jobs, he said.

“When the export balance contracts, it will lead to further problems for Indonesia, such as the potential for layoffs,” Ajib added.

The Indonesian Textile Association (API) warned that 50,000 to 70,000 workers could lose their jobs if the tariffs remain in place.

The second concern is a potential flood of Chinese goods into Indonesia. With the US imposing tariffs of up to 100 percent on Chinese products, China may redirect its exports to Indonesia, one of the world’s largest consumer markets. This could be worsened by potential dumping practices, with China selling products overseas at lower prices, putting local industries at risk.

“China is a trendsetter in the industrial and manufacturing sectors, with competitive advantages such as cheap energy, strong infrastructure, business clustering, and highly productive labor,” Ajib said.

The third risk is potential volatility in the rupiah against the U.S. dollar if Indonesia’s trade balance worsens due to the tariffs.

“The government has projected the rupiah at around Rp16,000 per dollar for 2025, but if the value keeps escalating, it will become a problem,” Ajib said.

The fourth concern is a further decline in Indonesia’s manufacturing Purchasing Managers’ Index (PMI). Ajib said Indonesia has experienced deindustrialization over the past decade due to a combination of domestic and global factors, which the new tariffs could aggravate.

According to S&P Global, Indonesia’s manufacturing PMI dropped to 46.9 in June 2025, down from 47.4 in May, marking continued contraction for Southeast Asia’s largest economy. A PMI reading below 50 indicates a decline in manufacturing activity.

Despite the uncertainty around the negotiations, Ajib urged Indonesia to use this moment to strengthen bilateral and multilateral partnerships with other countries, including ASEAN, BRICS, and the European Union, to diversify markets and support economic resilience.

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