Jakarta. Ex-minister Chatib Basri recently said that the US tariffs could create an opportunity for Indonesia as foreign companies would mull relocating their factories to Jakarta to avoid the steeper tariff hikes and Washington’s never-ending rivalry with China.

Effective Aug. 7, Indonesia will face a 19 percent tariff on exports to the US market, one of the lowest in ASEAN, though the same rate applies to Malaysia, Thailand, Cambodia, and the Philippines. Jakarta's garment competitors, China and Bangladesh, are facing higher tariffs, respectively at 30 percent and 20 percent. There might only be an 11 percentage point difference between Indonesia and China, but Beijing’s current tariff rate is the result of a fragile truce with Washington, which is due to expire on Aug. 12. The tariffs on China used to stand at 145 percent before the de-escalation.

Speaking at a Japanese business forum, Chatib said that US President Donald Trump's tariff salvo, coupled with the trade feud with China, could spur investment inflows. Chatib -- now President Prabowo Subianto’s economic advisor -- believes that foreign investors would want to diversify to keep risks at a minimum.

“Investors will keep tabs on this [tariff] situation when producing goods. They will think it'd be better to reallocate investments from higher-tariffed nations to those facing lower rates. That's the actual relocation opportunity," Chatib told the conference in Jakarta.

"We can see [this relocation trend] in the increased orders of our garments, indicating a shift from China and Bangladesh. … Producers also think it’d be risky if they set up a production base in China due to the trade war. And so they move their investments to ASEAN countries,” he said.

However, the senior economist said that investors would only come to Indonesia if Jakarta improves its investment climate. Chatib used to lead Indonesia’s investment coordinating board in 2012-2013. He admitted that the government had made some major improvements over the past years, even saying that the current systems could give investors better certainty.

Official government data showed that Indonesia had amassed Rp 432.6 trillion (approximately $26.5 billion) in foreign direct investments between January and June 2025. The top 5 foreign investors are as follows: Singapore ($8.8 billion), Hong Kong ($4.6 billion), China ($3.6 billion), Malaysia ($1.7 billion), and Japan ($1.6 billion). The data does not include investments in the upstream oil and gas sector or financial services.

The Jakarta Globe asked Japanese Ambassador to Indonesia Masaki Yasushi for comments on Chatib’s statement regarding tariff-induced relocation. This includes whether Japanese companies abroad plan to relocate their production base to Indonesia. Masaki admitted that it was still “too early” to comment on the tariff’s impacts on Japanese companies’ behavior.

“As everybody knows, Japanese companies choose Indonesia not because of the tariffs. … We have formed very good friendships, and mutual trust. That would not be affected by trade war, … but hopefully, it could give us a momentum to step up our cooperation,” Masaki told the Globe.

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