Jakarta. President Prabowo Subianto recently called his American counterpart Donald Trump’s tariff blitz a “wake-up call” for Indonesia to diversify its export markets and win the hearts of domestic consumers.

Prabowo, who had just met Trump himself earlier this week, was talking of the latter’s decision to slap 19 percent tariffs on Indonesian goods since August. He admitted that he understood why Trump decided to make the major trade move, citing its deficits, even using the more diplomatic term of “campaign”. Fortunately, Indonesia managed to make some huge progress in its free trade deal negotiations with the European Union (EU) and Canada.

“We succeeded in getting the Indonesia-EU Comprehensive Economic Partnership Agreement [CEPA]. … It’s a breakthrough because it came right when the US government started its tariff campaign,” Prabowo told the Forbes Global CEO Conference in Jakarta on Wednesday evening.

The ex-army general admitted that he would “understand” why Trump launched the tariffs.

“The whole world considers the US to be a nice market, [but] they don’t open their markets to American goods. … It’s the duty of every leader to protect their people.”

He added, “If you go into a tariff war, where will it stop, right? But for us, it’s a wake-up call. … I tell my guys … and the businesspeople that we must be more efficient, daring, and not always rely on an easy market, the US, the US.”

This prompted Jakarta to speed up the negotiations with the EU on the tariff-eliminating CEPA that could more than double the trade after the accord's entry into force by early 2027. While the pact’s substantive conclusion already got signed last month, both Indonesia and the EU still had to undergo some legislative processes. 

Prabowo had also brought home a CEPA-level trade pact with Canada from his recent world tour, even making Indonesia the first ASEAN member to strike such a deal with Ottawa. Likewise, the countries’ lawmakers will have to make the treaty legally binding first before exporters can do business at zero tariffs.

Prabowo went on to say that Jakarta was also looking to join the CPTPP, another trading bloc that includes Latin American economies Chile, Mexico, and Peru. Indonesia’s candidacy to the rich country club OECD remains underway. 

Trump’s 19 percent tariffs officially kicked in on August 7. According to trade data by the Central Statistics Agency (BPS), the tariff hikes had taken a toll on the US-bound exports, leading to a 12.39 percent month-on-month drop in August. Indonesia’s exports to the US only reached $2.72 billion in August. Even so, Washington’s trade gap with Indonesia soared to $12.20 billion in the first eight months of 2025.

Don’t Forget Domestic Market
While Indonesia intends to offset the tariff impact via export diversification, Prabowo acknowledged the huge potential of the market at home. 

“We believe that we should be in all the markets that we can. But basically, what’s more important is actually the Indonesian market. [Our population is] nearly 300 million people. We must boost our capacity and buying power,” he said.

Indonesia’s economy expanded at 5.12 percent year-on-year (yoy) in the second quarter of 2025. The Central Statistics Agency (BPS) data showed that household consumption remained the economy’s biggest driver, contributing about 54.25 percent of the growth compared to export’s 22.28 percent. Freshly minted Finance Minister Purbaya Yudhi Sadewa is mulling slashing the value-added tax (VAT) from the current 11 percent to boost purchasing power. Luxury goods and services are subject to a 12 percent VAT rate.

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