Economists Doubt Trump's Tariffs Will Boost Indonesian Exports

U.S. President Donald Trump has announced an additional 10 percent import tariff on goods from eight European countries starting February 1, 2026, citing their resistance to the United States’ intention to take control of Greenland. However, economists believe the policy is unlikely to create significant export opportunities for Indonesia, despite potentially weakening Europe’s competitiveness in the American market. Economist Muhammad Faisal from the Center of Reform on Economics (CORE) Indonesia said that, in theory, higher tariffs on European products could reduce their attractiveness in the U.S. market and open space for competing exporters. “Logically, if eight European countries are hit with an additional 10 percent tariff, their export competitiveness in the U.S. will decline. That opens opportunities for rival countries to take part of their market,” Faisal told Katadata.co.id on Monday, January 19, 2026. Nevertheless, he stressed that Indonesia is unlikely to benefit substantially because its export structure differs significantly from that of European countries. “When you look at product similarity, Indonesian exports to the U.S. are very different from European exports. So the possibility of Indonesia replacing Europe’s market share is relatively small,” he said. Faisal explained that Indonesia’s main exports to the United States consist of garments, textiles, footwear, fisheries products, and palm oil. In contrast, European countries primarily export high–value-added goods, including machinery, electronics, and automotive products —both finished and semi-finished. “The overlap in products is minimal. Therefore, the impact on Indonesia remains limited for now,” he added. According to Faisal, the countries most likely to benefit from the tariff shift are those whose export profiles closely resemble those of the affected European nations. Regarding broader trade implications, he said uncertainty remains high due to the unpredictable nature of U.S. trade policy under Trump. “The uncertainty is significant because everything depends on Trump’s policy mood. If Indonesia takes steps or makes offers that Washington dislikes, the risks could increase,” he warned. He emphasized the need for Indonesia to remain cautious in formulating trade and foreign policy strategies amid escalating global uncertainty. A similar view was expressed by Wijayanto Samirin, an economist at Paramadina University. He said Trump’s tariff threats against Europe are expected to have only a limited direct impact on Indonesia’s exports and imports with both the U.S. and the European Union. “However, these dynamics will continue to pressure global trade, which in turn will indirectly affect Indonesia’s export–import performance,” Wijayanto said. He noted that the most significant impact would likely be felt in the financial sector, particularly through increased volatility and downward pressure on the rupiah. Capital inflows—both portfolio and foreign direct investment—could weaken as investors shift toward assets denominated in stronger currencies. Wijayanto added that the global trade reduction effect would likely outweigh any potential trade diversion toward Indonesia. “Indonesian products are not direct substitutes for U.S. or European products, so opportunities to fill market gaps remain limited,” he said. He urged the government to focus on strengthening export diversification and competitiveness, including improving the domestic business climate. Accelerating negotiations on the Indonesia–European Union Comprehensive Economic Partnership Agreement (EU-CEPA) was also considered crucial, particularly as Europe seeks more reliable trade partners. “Learning from the uncertainty of Trump’s policies, Indonesia should respond calmly and avoid overshooting, because many of Trump’s ideas ultimately do not materialize,” Wijayanto said. Earlier, in a post on Truth Social, Trump announced that the additional 10 percent tariff would apply to imports from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the United Kingdom. He added that the tariff rate would rise to 25 percent starting June 1, and would remain in effect “until an agreement is reached allowing the United States to purchase Greenland.” Trump has repeatedly insisted on acquiring Greenland—an autonomous territory of Denmark—despite firm rejections from both Denmark and the Greenlandic government, which have emphasized that the island is not for sale. Trump argues that Greenland is vital to U.S. national security due to its strategic location and mineral resources, and has not ruled out the use of force. In response, several European countries have reportedly deployed military personnel to Greenland at Denmark’s request. European governments backing Denmark have warned that any attempt by the U.S. to seize territory within NATO could seriously undermine the alliance led by Washington.