Indonesia Weighs US Investment Amidst Looming Tariffs and Trump’s Incentives
Indonesia is actively exploring outbound investment opportunities, including potential factory construction in the United States, as it navigates a complex trade landscape shaped by looming tariffs and incentives offered by former US President Donald Trump. The situation, revealed on Tuesday, July 8, 2025, highlights a strategic balancing act for Jakarta as it seeks to mitigate economic risks and capitalize on potential benefits.
A deputy minister of foreign affairs stated that outbound investment is a key component of Indonesia’s economic strategy, extending far beyond the United States. “We have a lot of plans everywhere, not only in the United States,” the official said at the Parliament Complex in Senayan, Central Jakarta.
However, investment decisions are contingent on a multitude of factors. These include access to raw materials, efficient supply chains, and favorable market conditions. “But it depends on the market, depending on the supply chain, depending on the resource material. So the factor is a lot if we make a factory,” the official explained. The energy sector, specifically Migas (oil and gas), was identified as a particularly promising area for investment.
The backdrop to these considerations is a recent communication from Donald Trump to Indonesian President Prabowo Subianto. Trump proposed a potential exemption from import tariffs for Indonesia, contingent upon the construction of a factory within the US. He assured President Subianto of swift approval for any such project, stating, “As you know, there will be no tariffs if Indonesia, or companies in your country, decide to build or produce products in the United States, and in reality, we will do everything possible to get approval quickly, professionally, and routinely. In other words, in a matter of weeks.” This message was reportedly shared on a platform called Social Truth.
Despite this offer, a 32% tariff on Indonesian goods is scheduled to take effect on August 1, 2025. Trump indicated a willingness to reconsider this tariff if Indonesia were to reduce or eliminate its own trade barriers and open its markets to US products. “If you want to open your trade market that was previously closed to the United States, and eliminating the tariff and non-tariff policy and your trade barriers, we might consider adjusting this letter,” Trump wrote. He further emphasized the potential for a mutually beneficial relationship, stating, “You will never be disappointed with the United States.”
The continuation of the 32% tariff is rooted in the existing trade deficit between the US and Indonesia. According to the former president, a fair trade policy is necessary to address this imbalance and reduce the US deficit.
Check out the video: Trump’s letter to Prabowo: RI remains hit by a 32% tariff
Indonesia now faces a critical decision: whether to pursue investment in the US to avoid tariffs, potentially reshaping its trade strategy and economic priorities. The coming weeks will be crucial in determining the path forward for both nations.
