The Impact of US Protectionism on Indonesian Agricultural Exports

Challenges for Sustainable Business and Trade Innovation

Abstract

United States of America announced sweeping Reciprocal Tariffs in April 2025, targeting Indonesia with a 32% rate, the expected narrative was straightforward: agricultural exports would suffer. This study challenges that narrative. Drawing on twenty years of monthly export data and a robust time-series regression framework with Newey-West HAC correction designed to isolate genuine policy effects from concurrent macroeconomic noise, we find that neither the 2025 Reciprocal Tariff nor the 2018 Trade War suppressed Indonesia's agricultural exports. The positive short-run export response following the 2025 tariff is better explained through a trade diversion lens, as U.S. protectionism reshuffles global trade flows, Indonesia's agricultural commodities gain competitive ground in markets previously dominated by other exporters. What ultimately drives export performance, however, are structural forces: a weaker Rupiah, rising global palm oil prices, and higher rubber prices consistently outweigh any tariff headline. For policymakers, this reframes the strategic priority. Indonesia's agricultural export resilience is not won at the negotiating table, it is built through commodity competitiveness and exchange-rate positioning. The first empirical assessment of the 2025 Reciprocal Tariff's effect on Indonesian agricultural exports, this study contributes an early-assessment framework applicable to other developing economies navigating sudden tariff escalation.

Keywords: Reciprocal Tariff; Agricultural Exports; Newey-West HAC; Trade Diversion; Exchange Rate