Turning a 19 Percent Tariff into Inclusive Economic Reform

In towns across East Java, from Trenggalek to Pacitan, the impact of the new 19 percent US tariff on Indonesian exports is already being felt. For smallholder coconut farmers, family-run furniture workshops, and textile cooperatives, this is not a matter of geopolitics.

It is the sudden fear of cancelled orders, thinner margins, and being priced out of markets they once relied on. When an American customer is lost by a small shoe manufacturer in Madiun, it is less a business and more a matter of providing food for the family, subsidizing a factory, or educating children. The US may see this move as a correction for its trade deficit, but for most Indonesians, it’s something more immediate, disruption of day-to-day survival and a reminder that the marketplace is unpredictable and can shift day or night with or without our consent.

Indonesia avoided a steeper 32 percent tariff; a figure previously floated as part of high-stakes trade negotiations. In exchange, we committed to sizeable purchases of aircraft, energy, and agricultural products from the US. Even at 19 percent, the tariff is substantial. It hurts disproportionately the labor-intensive, export-oriented industries like apparel, footwear, rubber, palm oil, and basic electronics.

These industries are the backbone of our non-urban economies. They maintain employment in regencies away from Jakarta, in towns that never get international headlines, yet are the economic lifelines for the millions.

This moment demands clear thinking and a forward-looking response. It would be a mistake to frame the tariff solely as a loss. It is also a wake-up call. As a member of Commission VII of the Indonesian House of Representatives (DPR RI), which works closely with the Ministry of Industry, Ministry of Tourism, Ministry of Cooperatives and SMEs, Ministry of Creative Economy, the National Standardization Agency of Indonesia (BSN), ANTARA News, RRI, and TVRI, I do not see this as the ultimate setback, but as a strategic inflection point. With wise action, the tariff could lead us down a more balanced, more resilient, and more inclusive economic future.

Our vulnerabilities are not new. Too much of our export economy still depends on low-value goods sent to too few destinations. American buyers dominate several of our top-performing sectors, not because they offer better terms, but because our producers lack viable alternatives. In many regions, particularly outside Java’s economic belt, access to global markets remains fragile and expensive. SMEs struggle with logistics, quality certification, and digital visibility. The playing field has never been level. Tariff pressure makes these gaps harder to ignore.

For example, a small footwear producer in Trenggalek may now find their US buyer cutting volume or renegotiating prices. At the same time, Indonesian markets could soon be flooded with US imports as part of the same agreement, further squeezing domestic manufacturers. If we are not ready with protections, capacitybuilding, and clear direction, we risk becoming passive participants in our own economy. This is where policy must intervene, not with panic but with precision.

Commission VII is currently engaged in supporting industrial upgrading at scale. This includes strengthening domestic down streaming, providing innovation incentives, and pushing for greater use of local content in production chains. Instead of exporting raw rubber or crude palm oil, we must add value here at home.

Technology, research, and product development cannot remain the domain of large corporations alone. They must be made accessible to smaller producers as well, through integrated funding and mentorship platforms that reach even second-tier cities and rural areas. At the same time, Indonesia must rethink its external trade map. Over-reliance on a single dominant buyer puts any economy at risk.

Diversifying export destinations through deeper ASEAN integration, BRICS collaboration, and stronger ties with Africa and the Middle East is no longer optional. These are not vague slogans, they require real work at the legislative and executive levels, to renegotiate quotas, remove technical barriers, and position our SMEs to compete beyond existing comfort zones. Yet policy alone is never enough. Communities affected by economic shocks need support that goes beyond seminars and symbolic visits. Welfare programmes, vocational training, digital market access, and soft loans must be brought closer to the people.

In regions where livelihoods depend on cross-border demand, a sudden drop in export orders has immediate consequences. Budgets must be realigned to reflect this urgency. National funds should not merely buffer headline sectors, they must protect real people and real jobs. One important way forward is through tighter coordination between central and local governments.

When a policy shock like these hits, the burden is often first carried by local leaders, who must explain why factories are downsizing or why prices are rising. They are the ones facing residents whose orders have been cancelled or whose export permits have become redundant. A smart national strategy must be executable on the ground. That entails engaging the local authorities, chambers of commerce, cooperatives, and vocational schools within one line of communication and collective responsibility. The local governments should be enabled not only to absorb the shock, but design the solutions via budget flexibility, local innovation hubs, and customized SME assistance.

This moment has the chance to launch Indonesia into a new economic order, a different one which openness is matched with preparation, growth with fairness, and competitiveness with prudence. The US will still promote its own interests, so will we. The goal is not retaliation, but readiness. Trade is no longer governed purely by tariffs and quotas. It is characterized by credibility, coherence, and the ability to correct course at a rapid pace. Indonesia must now show that it can rise to that challenge, not just as a reactive partner, but as a confident economic actor.

The road ahead requires more than high-level negotiation. It demands courage in budget decisions, honesty in communication, and inclusion in execution. Parliament has a role, but so do cooperatives, school principals, village heads, and microfinance agents. Their insights must shape the national response, not as token input but as front-line intelligence. Only with this kind of social granularity can we rebuild confidence, redistribute opportunity, and restore momentum. This is not the end of Indonesia’s export story. It is the beginning of a more complex chapter, one where resilience will depend less on external privilege and more on internal strength. For every factory in Central Java or processing plant in Sumatra, for every trader in East Kalimantan or workshop in NTB this moment carries risks. But it also carries instructions, we must invest in what sustains us. And we must ensure that no policy, however distant or technical is allowed to deepen inequality or erode dignity.

I write this not only as a legislator in Commission VII, but as someone deeply aware that policy is not abstract. It is felt at home, in marketplaces, in WhatsApp messages from exporters unsure about their next shipment. The tariff may have come from Washington, but the responsibility to respond lies with us. And we must do so with a clear head, a firm purpose, and a commitment to ensure that Indonesia’s future is not decided by others but shaped deliberately by its people and for its people. This is also a moment for Indonesia’s partners to recognise that trade justice must be built not only in negotiation rooms, but in the real economies of real communities.


 

This article was written by Novita Hardini, S.E., M.E., a member of Commission VII of the Indonesian House of Representatives (DPR RI), which works closely with the Ministry of Industry, Ministry of Tourism, Ministry of Cooperatives and SMEs, Ministry of Creative Economy, the National Standardization Agency of Indonesia (BSN), ANTARA News, RRI, and TVRI.