Indonesia reviews non-tariff deregulation for US tech products

Government considers relaxing TKDN to strengthen trade relations with the US amid rising tariffs.

President Prabowo Subianto (center) delivers remarks during the Joint Economic Discussion at Menara Mandiri in Senayan, Jakarta, on Tuesday, April 8, 2025. Photo by Aditya Pradana Putra/Antara

By Anna Fadiah and Hayu Andini

Indonesia reviews non-tariff deregulation for US tech products as part of a strategic trade response to new US import tariffs. The move, led by Coordinating Minister for Economic Affairs Airlangga Hartarto, focuses on relaxing the Domestic Component Level (TKDN) regulations for major American technology firms such as Apple, Oracle, Microsoft, and General Electric.

The plan was officially discussed during the Joint Economic Discussion with the President of the Republic of Indonesia on Tuesday, April 8, at Menara Mandiri, Jakarta. The high-level meeting was also attended by President Prabowo Subianto and Finance Minister Sri Mulyani Indrawati, reflecting the urgency and significance of the issue at the national level.

This policy review is a direct response to US President Donald Trump's decision to impose import tariffs of up to 32% on Indonesian goods. Rather than escalate tensions, the Indonesian government is looking for a balanced approach that both supports domestic industries and maintains a healthy trade relationship with one of its largest economic partners.

Relaxing TKDN for US technology giants

The Domestic Component Level (TKDN) requirement has long been a key pillar in Indonesia’s economic policy, designed to boost local manufacturing and industry. However, in light of mounting trade pressures, the government is exploring ways to relax these rules—specifically for companies in the Information and Communication Technology (ICT) sector.

By easing TKDN requirements for American tech firms, Indonesia hopes to encourage investment and technology transfer while smoothing trade negotiations. Companies like Apple and Microsoft could benefit from more accessible market entry, which in turn may stimulate local employment and digital infrastructure development.

Airlangga Hartarto explained that deregulating non-tariff measures (NTMs) in the tech sector is part of a broader package. The strategy also involves balancing the trade ledger with the United States by increasing imports of key American commodities, such as soybeans, industrial machinery, liquefied petroleum gas (LPG), liquefied natural gas (LNG), and other oil and gas products.

A dual-track strategy: Incentives and trade balance

The Indonesian government is not limiting its efforts to deregulation alone. A series of fiscal and non-fiscal incentives is being prepared to support the importation of US products. These incentives are designed to smooth over friction with Washington while retaining Indonesia's competitive edge in the American market.

“Our approach is not one-dimensional,” said Airlangga. “We want to maintain export competitiveness while also showing goodwill by importing more from the US. This kind of reciprocal economic diplomacy is what’s needed in today’s global climate.”

Indonesia is also aware of its relatively low dependency on the US market, which provides flexibility in negotiations. While the US is an important trade partner, it is not the sole focus of Indonesia’s export strategy. This gives Jakarta more leeway to adjust policies without significant disruption to its overall economic performance.

Targeting high-potential export sectors

Despite US-imposed tariffs, Indonesia sees significant opportunity for its leading export sectors, especially clothing and footwear. These products remain competitive due to Indonesia's lower export duties compared to regional competitors. For instance, Vietnam faces a 46% tariff rate, Bangladesh 37%, and Cambodia 49%. In contrast, Indonesian goods are subjected to far more favorable rates, giving them a strong position in the American market.

Airlangga pointed out that this competitive edge, if properly leveraged, can help Indonesia maintain or even expand its export volumes to the US despite the new tariffs. “The key is adaptability and policy precision,” he said. “We must seize opportunities in the gaps left by our competitors.”

In addition to the garment and footwear industries, sectors such as furniture, electronics, and processed food also stand to benefit from targeted government support and relaxed regulatory burdens.

Strategic timing in a shifting global economy

The timing of this policy initiative is crucial. With global trade facing renewed uncertainty—driven not only by the US tariff policies but also by rising protectionism in Europe and economic slowdowns in China—Indonesia must act decisively to protect and grow its share in global markets.

Relaxing TKDN is not without domestic controversy. Critics argue it may reduce opportunities for local manufacturers or compromise the country’s long-term industrial independence. However, proponents insist that selective relaxation—limited to key US tech firms—will produce more benefits than drawbacks, especially in terms of digital transformation and international investor confidence.

Furthermore, the deregulation move could enhance Indonesia's standing in broader trade discussions, including its ongoing involvement in the Indo-Pacific Economic Framework (IPEF) and other bilateral economic agreements.

Government aims for sustainable trade equilibrium

Airlangga emphasized that the ultimate goal of Indonesia’s trade strategy is sustainability. By fostering a fair and balanced trade environment with the US, Indonesia can continue its economic expansion while avoiding unnecessary trade wars or diplomatic friction.

“We are not chasing short-term wins,” Airlangga said. “This is about building long-term economic resilience through policy innovation and pragmatic diplomacy.”

As discussions continue, the Ministry of Economic Affairs is working closely with the Ministry of Trade and other relevant agencies to finalize the deregulation framework and incentive packages. The final policy announcement is expected in the coming weeks, pending cabinet approval.

Balancing domestic interest and international relations

The decision to review non-tariff deregulation for US tech products is just one part of Indonesia’s broader strategy to adapt to shifting global dynamics. As the world becomes more interconnected and competitive, countries like Indonesia must find creative ways to protect national interests while engaging with key economic partners.

Relaxing TKDN requirements for select American companies signals a pragmatic turn in policy—a recognition that, sometimes, economic diplomacy requires compromise. However, with strategic planning and careful implementation, the government hopes to ensure that this compromise leads to greater gains for both sides.

Whether Indonesia's plan succeeds will depend on how effectively it can align internal industrial goals with external trade demands. For now, the review of non-tariff deregulation is a bold step toward economic agility and stronger international partnerships.

Indonesia reviews non-tariff deregulation for US tech products as a forward-thinking response to external trade pressure and internal development needs. Through a calculated mix of TKDN relaxation, strategic imports, and support for leading export sectors, the government aims to maintain its economic momentum and reinforce ties with a key global partner.

As the world watches how Indonesia navigates this complex trade landscape, one thing is clear: flexibility, innovation, and diplomatic finesse will be essential tools for success.