Jakarta. An analyst recently gave some head-ups on the impact of Donald Trump’s possible return to the White House on US-Indonesia economic ties.

Although Republicans have yet to choose their presidential nominee, Trump has been the front-runner. The businessman-turned-politician Trump is the top choice for 52 percent of Republicans and Republican-leaning registered voters for the party’s presidential nomination in 2024, a report by think-tank Pew Research Center shows. It is likely that Trump will have a rematch with the incumbent Joe Biden in the upcoming election this November. If Trump wins, Indonesia needs to brace itself for some changes.  

Muhammad Habib, an international relations researcher at the think-tank Center for Strategic and International Studies (CSIS), told the Jakarta Globe on Tuesday that Indonesia-US economic ties could face some changes, judging by Trump’s past economic policies as the president. In 2018, Trump announced that he would review the eligibility of countries enjoying the tariff reductions under the generalized system of preferences (GSP) system, including Indonesia, with which the US had trade deficits. The GSP, however, already expired in late 2020, and is now waiting for congressional renewal.

“We are currently enjoying a surplus with the US. If Trump gets reelected, there could be a review of the trading instruments between Indonesia and the US. … And [the US] will likely have a stronger ‘me-first policy’,” Habib told the Globe.

He also warned that the US-China tension could worsen if Trump returned to the White House. The substantial Chinese investment in Indonesia, particularly in the minerals sector, will likely spark concerns for a Trump-led US, according to Habib. 

“Indonesia has to be ready for a more uncertain world, especially if Trump wins the election,” Habib said.

Nickel-rich Indonesia is trying to secure a critical mineral agreement with the US. If Indonesia can get this pact, electric vehicles (EVs) made from Indonesian batteries can enjoy the tax credits under the Inflation Reduction Act (IRA). However, the government only grants the tax credits if the batteries are made using minerals extracted or processed in the US  or the country’s free trade agreement partners. Indonesia today does not have a free trade agreement with the US.

There are two likely scenarios for the deal if Trump claims victory. The first scenario is that the deficits that the US suffers when trading with Indonesia can hamper the negotiations. The second scenario is that the negotiations will likely go more smoothly, as Trump does not pay much attention to environmental concerns as he once pulled the US out of the climate accord Paris Agreement, according to Habib.

“But it depends on whether the critical mineral agreement is in the form of a law that needs to get ratified or it will be an executive order. It will likely be easier if it is an executive order. But if it is something that needs to get approved by the congress, Indonesia, of course, has to meet the standards,” Habib said.

An executive order requires no approval from the congress.

Government data shows Indonesia-US trade totaled $39.8 billion in 2022. Indonesia recorded a $16.6 billion surplus that year. In January-October 2023, bilateral trade reached $28.6 billion with a $9.8 billion surplus for Indonesia. China is Indonesia’s second-largest foreign investor in January-September 2023, investing approximately $5.6 billion over the said period. The US came in 5th place with $2.4 billion in foreign investments to Indonesia.