Sunday, July 06, 2025

Strategic Reciprocity: Indonesia’s Path To Navigating Trump’s ‘America First Agenda’ – OpEd



  

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Under a Second Trump Administration, pragmatic engagement requires Indonesia to showcase its position as an equal partner that delivers mutual benefits in economic and security areas.


The July 2025, memorandum of understanding worth USD 34 billion marks Jakarta’s willingness to perform trade-off diplomatic actions before the essential tariff renegotiation deadline expired. The agreement demonstrates Indonesia’s commitment to support the “America First” approach by exchanging larger American fuel and agricultural products and aerospace technology purchases for lower nickel and cobalt and essential mineral export taxes. The success of these initial concessions demands that Indonesia enhance its analysis capabilities for strategic advantage and economic diversification, and security reinforcement within a volatile bilateral system.

The extensive use of raw commodity exports has given Indonesia both power and risk factors for several decades. Indonesia maintains its essential position as an electric vehicle and advanced electronics supplier to U.S. industries because of its abundant nickel, cobalt, and bauxite resources, but faces both market volatility and international market challenges. Indonesia should speed up its efforts to transform resource advantages into sustainable strategic benefits through shared facility operations for smelting and refining, and technology partnership deals. The strategy will create export revenue stability and incorporate U.S. businesses into Indonesian manufacturing operations, which would increase the political and economic consequences of sudden policy changes. Foreign investors remain cautious because the recent regulatory change that relaxed import restrictions across ten major commodity sectors lacks proper legal protections and clear licensing guidelines.

Export expansion into high-value manufactured products alongside digital services presents an opportunity to deepen U.S.-Indonesia relations. The U.S. market compatibility of Indonesian electronics, medical devices, and niche textiles requires strict adherence to American product standards and intellectual property laws, and cybersecurity regulations. The country must streamline licensing processes while developing better energy and logistics infrastructure and digital governance frameworks to draw foreign direct investment. Through the Just Energy Transition Partnership, Indonesia can use private capital to fund renewable energy projects that match U.S. decarbonization goals and develop technological exchange for solar, wind, and geothermal power systems.

The alignment of economic interests between the two nations strengthens when they collaborate on maritime security and counterterrorism matters, which address common Indo-Pacific strategic concerns. The “free and active” foreign policy of Indonesia enables flexible multilateral engagement but allows for specific cooperation with U.S. strategic goals. The combination of joint maritime surveillance and satellite intelligence platforms with shared awareness systems will help Indonesia fight illegal fishing activities as well as piracy and territorial violations in the South China Sea. The enhancement of cyber defense and digital forensic capabilities, and counterterrorism training by the U.S. will help Indonesia strengthen its internal security capabilities without violating national sovereignty. Through its leadership in ASEAN, Indonesia should initiate multilateral responses to regional problems, and Washington should publicly endorse ASEAN centrality to counter great power competition.

Numerous obstacles exist that could block the development of deep bilateral ties. The transactional style of the Trump Administration creates a risk of neglecting institutional development, which forms the basis of lasting partnership development. The economic nationalist policies of Jakarta, which result in random export restrictions and sudden licensing interruptions, and inconsistent regulatory enforcement practices, create investor doubt and result in unpredictable treatment from other nations. Powerful oligarchs, together with regional governors within Indonesia, demonstrate opposition to export diversification measures and foreign investment reforms.


The unpredictable U.S. tariff policies and constant renegotiation schedules force Indonesia to maintain a defensive stance, which reduces available political resources needed for strategic planning and reform execution. The fundamental disagreement between U.S. China policy and Indonesian China relations has reached a critical point because the U.S. aims to restrict Chinese influence, but Indonesia maintains important economic and infrastructure ties with China while avoiding alliances. Strategic diplomacy needs to handle these conflicting demands by fulfilling U.S. security needs without triggering Beijing’s opposition while preserving Indonesia’s independence.

The ultimate success or failure of Indonesia depends on how strong its policymaking system is as an institution. The nation needs to develop professional trade negotiation teams and create stable regulatory frameworks that will enable BKPM (the Investment Coordinating Board) to provide foreign firms with reliable representation. The government needs to develop communication links with both legislative bodies and civil society groups to create domestic agreement on needed reforms under “America First” engagement. Jakarta must explain the distributional impacts of liberalization policies to the public to prevent political opposition and maintain continuous support.

The deepening partnership between Indonesia and the United States during a Second Trump Administration needs a comprehensive strategy that moves past immediate solutions. Indonesia must transform its vital mineral resources into vertically organized production networks while expanding its exports into high-value products and digital business services, and building specific security agreements that focus on maritime cooperation and counterterrorism. Significant obstacles exist to these opportunities because the U.S. administration demands transactional dealings, while Jakarta faces regulatory unpredictability and domestic political opposition and needs to maintain equilibrium between its relations with China and the United States. The success of Indonesia depends on its ability to build transparent, rules-based policymaking institutions and develop professional negotiation teams while creating diplomatic relationships that support U.S. requirements without compromising national sovereignty. The only path to success in navigating “America First” policy as an indispensable Indo-Pacific partner involves an academic approach.

The opinions expressed in this article are the author’s own.

References


Simon Hutagalung

Simon Hutagalung is a retired diplomat from the Indonesian Foreign Ministry and received his master's degree in political science and comparative politics from the City University of New York. The opinions expressed in his articles are his own.

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