Indonesia Gears Up for Potential Economic Challenges Under Trump‘s Second Term
The Indonesian government is carefully monitoring potential economic repercussions stemming from increased protectionist policies under a second Trump administration. National Economic Council head Luhut Pandjaitan has cautioned that the global economic outlook could become more turbulent, with global growth slowing and inflation rising.
Potential Impact on the Indonesian Rupiah
“The impact we expect from Trump’s second presidential term is a slowing down of global economic growth and inflation that will be higher. We worry that the US dollar will be stronger and impact our rupiah,” Luhut said on Monday.
Luhut also highlighted Trump’s plan to create a Department of Government Efficiency, led by tech magnate Elon Musk, aimed at slashing the US federal budget by up to US$2 trillion. This initiative, coupled with the potential for higher tariffs and a realignment of US alliances based on shared interests, has prompted Indonesia to assess its diplomatic and economic strategies.
“Playing Smart” in US Relations
Luhut emphasized the need for Indonesia to “play smart” in its dealings with the US, describing Trump as a pragmatic leader who reacts strongly to perceived threats. Luhut’s words suggest that Indonesia is preparing for a more transactional relationship with the US, one where economic and strategic considerations will be closely intertwined.
Tariff Increases and a Reshaped Global Order
In an interview with CNBC Indonesia on Monday, Luhut laid out two major policy shifts under a potential second Trump administration that could significantly impact Indonesia: first, the imposition of higher tariffs, and second, the categorization of countries based on their alignment with US interests. Both these policies point towards a world where economic and political power dynamics are increasingly defined through the lens of national interest.
The threat of tariffs, particularly against emerging markets like those represented by the BRICS group (Brazil, Russia, India, China, South Africa), adds a layer of uncertainty to global trade. Trump, on Monday, served a warning to the BRICS nations right away. Should these countries undermine the US dollar, he threatened to impose substantial tariffs.
What are the specific concerns Indonesian officials have about a potential second Trump term regarding the Indonesian economy?
## Indonesia Braces for Economic Turbulence Under Potential Second Trump Term
**Host:** Welcome back to the show. Today we’re discussing the potential impact of a second Donald Trump presidency on the Indonesian economy. Joining us is Professor Sri Murni, an expert on international economics and Southeast Asian affairs. Professor Murni, thank you for being here.
**Professor Murni:** My pleasure.
**Host:** Let’s start with the elephant in the room. How concerned are Indonesian officials about the prospect of a second Trump term and its potential economic consequences? From what we understand, National Economic Council head Luhut Pandjaitan has expressed some reservations.
**Professor Murni:** You’re right, Luhut Pandjaitan has been quite vocal about his concerns. He sees the possibility of slower global economic growth and higher inflation under a second Trump administration. [1]
**Host:** And what are the specific factors driving these concerns?
**Professor Murni:** Several things. Firstly, Trump’s protectionist policies and potential for increased tariffs could significantly impact global trade, particularly for emerging markets like Indonesia. [1] Secondly, his proposed Department of Government Efficiency, headed by Elon Musk, aims to drastically cut the US federal budget, which could have ripple effects on the global economy.
**Host:** So, what steps is Indonesia taking to mitigate these risks?
**Professor Murni:** As Luhut Pandjaitan indicated, Indonesia is adopting a strategy of “playing smart” in its dealings with the US. It’s about being pragmatic and prioritizing economic and strategic interests.
**Host:** Essentially, preparing for a more transactional relationship with the US?
**Professor Murni:** Precisely. Indonesia understands that with President Trump, it’s about clearly defined interests and tangible benefits.
**Host:** Fascinating. Professor Murni, thank you for shedding light on this complex situation.
**Professor Murni:** My pleasure.
