Indonesia is currently one of ten countries facing steep trade tariffs from the United States. Washington has announced a reciprocal tariff of 32 percent on Indonesian goods, although the measure has a 90-day delay starting from April 9, 2025.
Recently, China successfully negotiated a reduction in its import tariffs from 145 percent to 30 percent with the US government.
Professor Mailinda Eka Yuniza, an administrative law professor at the UGM Faculty of Law (FH UGM), believes that trade negotiations between Indonesia and the US should carefully balance America’s need for critical minerals and Indonesia’s goal to develop domestic processing industries.
According to Professor Yuniza, the US is in the process of lifting global import duties on several key minerals, a move that, while unsurprising, signals the strategic importance of these materials to the US economy.
“These materials are essential to the US economy, used in everything from smartphones to guided missiles,” she said on Monday (May 19).
“This essentially enhances American access to these resources and elevates their global strategic value.”
Professor Yuniza noted that mineral-rich nations now hold stronger bargaining positions in talks with the United States.
She cited China, which produces around 90 percent of the world’s rare earth metals and is a major supplier to the US, as an example.
China responded swiftly by halting exports of various critical minerals. Likewise, Indonesia, which holds 34 percent of the world’s nickel reserves, has signaled a possible use of these resources as a bargaining chip in response to the tariffs.
“This leverage is not theoretical. Both China’s and Indonesia’s restrictions have been categorized as non-tariff barriers in the latest National Trade Estimate Report on Foreign Trade Barriers by the United States Trade Representative,” she explained.
However, she added that the Indonesian government currently faces a dilemma to capitalize on short-term advantages or focus on its long-term industrialization goals.
Leveraging mineral exports as a bargaining tool could prolong trade talks with the US. Unlike China, a global economic powerhouse that can redirect its exports to other markets, Indonesia lacks such flexibility.
“As a developing country, Indonesia may not be able to absorb the financial impact of prolonged tariffs,” she noted.
Professor Yuniza observed that Indonesia has taken a more cooperative approach so far. The government has pledged several concessions to meet US demands, including reducing import quotas and easing local content requirements for American electronic products.
“I believe these steps are aimed at resolving the trade conflict quickly,” she remarked.
However, a more open trade agreement with the US could weaken long-standing Indonesian policies.
Since 2020, Indonesia has pushed for domestic processing of mineral ores in accordance with Law No. 3 of 2020 on Mineral and Coal Mining.
The government has invested heavily in downstream industries, supported the creation of new state-owned enterprises like Danantara, and faced legal challenges from the European Union over its mineral export ban.
“Reversing course now would undermine years of effort and investment,” she said.
One possible path forward could involve reviving the Trade and Investment Framework Agreement (TIFA) with the US.
Still, this route has challenges. As part of any new agreement, the US will likely demand greater access to Indonesia’s critical minerals.
“Signs of this are already visible in recent trade talks, where Indonesia has shown a willingness to deepen cooperation in the critical minerals supply chain, though the scope and mechanism remain unclear,” she said.
Crucially, Indonesia’s current legal framework still strictly prohibits the export of raw mineral ores.
Thus, any deal significantly expanding US market access to these resources would likely require major legislative and regulatory reform.
“If the US pushes for broad market liberalization in this sector, Indonesia will need to undertake structural policy changes beyond diplomatic commitments,” she stressed.
Nevertheless, Professor Yuniza emphasized that businesses need stable trade regulations. If uncertainty over US trade policy persists, many countries may opt to strengthen regional trade ties instead.
“If this trend continues, the world could move further away from global cooperation and toward a system where only select groups of countries work together,” she warned.
Author: Kezia Dwina Nathania
Editor: Gusti Grehenson
Post-editor: Afifudin Baliya
Photographer: AFP/Brendan Smialowski