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Navigating Uncertainty: U.S.-Indonesian Relations in Trump’s Second Term

Indonesian President Prabowo Subianto

On November 5, 2024, the world turned its attention to the U.S. presidential elections. Indonesia, the largest Southeast Asian nation, was no exception. The return of Donald Trump to the White House presents both challenges and opportunities for Indonesia.

During Donald Trump’s first term (2017-2021), U.S.-Indonesia relations remained stable, avoiding significant disruptions. The strategic partnership established under President Barack Obama continued, grounded in both economic and military cooperation. While Indonesia was cautious about the growing rivalry between the United States and China, it adhered to its long-standing principle of bebas dan aktif (independent and active) avoiding alignment with either power. At the same time, Indonesia welcomed American investments and supported the U.S. stance on a rules-based order and freedom of navigation in the South China Sea.

Nevertheless, a few points of contention emerged. Indonesia’s access to the Generalized System of Preferences (GSP), which allows duty-free entry into the U.S. market, was under review until its renewal in 2020.[1] Additionally, in 2020, bilateral talks raised the possibility of the U.S. investing up to US$ 2 billion in the Indonesia Investment Authority, a sovereign wealth fund, as a form of development assistance. However, this investment was conditioned on Indonesia’s recognition of Israel.[2] The Joko Widodo administration rejected the American demand due to domestic concerns.

New Leaders in Indonesia and the United States

On February 14, 2024, Indonesia held its presidential elections resulting in a victory for Prabowo Subianto, one of the most charismatic yet controversial figures in the nation’s politics. Born into a political family – his father Sumitro Djojohadikusumo served as Minister of Finance and Minister of Research – Prabowo was also the son-in-law of Indonesia’s former dictator Suharto. Initially following a military career, Prabowo rose to the rank of army general. However, following Suharto’s fall, Prabowo was discharged from the military amid allegations of coordinating the kidnapping of pro-democracy activists, an accusation that led to him being barred from entering the United States for nearly 20 years. Prabowo’s rise to prominence as a politician began in 2004, shortly before Indonesia’s first direct presidential elections in which he ran as a candidate.

Trump and Prabowo are frequently regarded as right-wing populist and nationalist leaders, elected democratically but adopting authoritarian rhetoric. Both prioritize personal connections over institutional frameworks in their approach to foreign relations, which are characterized by a pragmatic approach combined with sporadic statements and unpredictable actions. Interestingly, the two men are products of the baby-boom generation, further highlighting their generational and ideological parallels.

Risks for Indonesia in Trump’s Second Term

The current political trajectory of the United States and the potential expansion of U.S.-China geopolitical rivalry pose significant challenges for Indonesian policymakers. Indonesia is one of the countries that may face substantial economic repercussions during Trump’s second presidency.

Indonesian goods may become subject to 10-20 percent tariffs under enhanced U.S. protectionist policies.[3] As the United States is the second largest market for Indonesian exports, worth$26,8 billion, Indonesia’s trade surplus of nearly $17 billion could be impacted.[4] Additionally, the proposed U.S.-Indonesia limited free trade agreement aimed at securing nickel supplies for the United States could be canceled due to the involvement of Chinese investors in Indonesia’s nickel industry.[5]

The Trump administration is also likely to withdraw from the Joint Energy Transition Partnership (JEPT), a $20 billion initiative to support Indonesia’s transition to renewable energy.[6]  Moreover, Indonesia has already expressed concerns about potentially being removed from the GSP, a measure that would increase the cost of Indonesian chemicals, electronics, furniture and rubber, which together account for around 15 percent of Indonesian exports to the U.S..[7] Finally, there are also fears that Trump’s incentives could divert Foreign Direct Investments (FDI) away from Indonesia to the U.S. market[8].

Indonesia’s recent international moves such as plans to gain full membership in BRICS, as well as the signing of $10 billion worth of contracts with China[9] can be perceived as an attempt to maximize economic benefits in response to the potential economic challenges posed by Trump’s new presidency. Despite speculation about Indonesia abandoning its non-alignment policy, the country continues to conduct joint military drills with Western militaries[10] and remains keen on joining the OECD[11] and the CPTPP (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership), a pro-Western trade bloc in the Indo-Pacific region.[12]

Conclusion

U.S.-Indonesian relations are entering a new phase characterized by increasing unpredictability and tensions. Trump’s protectionist policies, targeting not only China but also other developing nations, risk straining bilateral ties between the two countries. While Indonesia remains committed to its non-alignment policy and is still keen to join pro-Western forums, recent engagements with Beijing and BRICS suggest a potential drift toward deeper alignment with China. Growing dependency on Beijing could jeopardize Indonesia’s neutral stance.

In light of this, U.S. foreign policy should adopt a softer touch and a more collaborative approach, seeking to identify common ground and aiming to counter Indonesia’s growing tilt toward China while respecting and strengthening Indonesia’s longstanding non-aligned policy This strategy should focus on fostering closer ties with Indonesia, not only in the realm of security but also through enhanced economic collaboration. Such efforts would encourage a balanced yet deeper partnership with the United States.

The personal and pragmatic leadership styles of Trump and Prabowo could serve as a foundation for enhancing bilateral relations. By concentrating on shared interests in areas like regional security, and economic and infrastructure development, this partnership could pave the way for harmonization of national priorities in a manner that benefits both nations.

Roman Fainshmidt is an intern at the Jerusalem Institute for Strategy and Security


[1] “USTR Announces New GSP Eligibility Reviews of India, Indonesia, and Kazakhstan”, Office of the United States Trade Representative, April 12, 2018, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/april/ustr-announces-new-gsp-eligibility  [Accessed: December 3, 2024]

[2] “Trump administration offering Indonesia billions in aid for Israel normalization”, The Times of Israel, December 23, 2020, https://www.timesofisrael.com/trump-administration-offering-indonesia-billions-in-aid-for-israel-normalization/ [Accessed: December 2, 2024]

[3] “Govt maps strategy for Trump’s policy impacts on Indonesian exports”, ANTARA, November 19, 2024, https://en.antaranews.com/news/335001/govt-maps-strategy-for-trumps-policy-impacts-on-indonesian-exports [Accessed: December 2, 2024]

[4] Trade in Goods with Indonesia, United States Census Bureau, October 2024, https://www.census.gov/foreign-trade/balance/c5600.html [Accessed: December 2, 2024]

[5] “Will Indonesia’s Prabowo move closer to Trump, Xi or both?”, Voice of America, November 8, 2024, https://www.voanews.com/a/will-indonesia-s-prabowo-move-closer-to-trump-xi-or-both-/7857841.html [Accessed: December 3, 2024]

[6] “No new impetus seen for JETP under Trump”, The Jakarta Post, November 21, 2024, https://www.thejakartapost.com/business/2024/11/21/no-new-impetus-seen-for-jetp-under-trump.html [Accessed: December 2, 2024]

[7] “How A Second Trump Presidency Will Impact Indonesian Economy”, Jakarta Globe, November 18, 2024, https://jakartaglobe.id/opinion/how-a-second-trump-presidency-will-impact-indonesian-economy [Accessed: December 2, 2024]

[8] “Trump policies could cast shadow over Indonesia, Asia”, Asia News Network, November 19, 2024, https://asianews.network/trump-policies-could-cast-shadow-over-indonesia-asia/  [Accessed: December 3, 2024]

[9] “Is Beijing undermining Indonesia’s free and active foreign policy?, The Jakarta Post, November 27, 2024, https://www.thejakartapost.com/opinion/2024/11/27/is-beijing-undermining-indonesias-free-and-active-foreign-policy.html [Accessed: December 3, 2024]

[10] “Indonesia and Australia hold joint military drills after signing a new defense agreement”, Associated Press, November 13, 2024, https://apnews.com/article/indonesia-australia-joint-military-exercise-a65a21004a1ec821c5b2f61d2bb8154e [Accessed: December 3, 2024]

[11] “Indonesian President Prabowo sees ‘no problem’ with joining OECD and BRICS”, Asia News Network, November 15, 2024, https://asianews.network/indonesian-president-prabowo-sees-no-problem-with-joining-oecd-and-brics/ [Accessed: December 3, 2024]

[12] “UK to Assist Indonesia with Registering Process for CPTPP Membership”, Jakarta Globe, November 22, 2024, https://jakartaglobe.id/news/uk-to-assist-indonesia-with-registering-process-for-cptpp-membership [Accessed: December 3, 2024]


JISS Policy Papers are published through the generosity of the Greg Rosshandler Family.


Photo: IMAGO / Xinhua

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Roman Fainshmidt is an intern at the Jerusalem Institute for Strategy and Security

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