Trade Deficit Looms as Economist Warns of Export Risks

Indonesia's export performance in the latter half of 2026 is under threat from a confluence of global economic headwinds, according to Yusuf Rendy Manilet, an economist at CORE Indonesia. He highlighted that the full impact of U.S. import tariffs is expected to materialize later in the year, as importers adjust their orders, a process that takes several months.

Manilet cautioned that Indonesia must also contend with the risk of export orders being redirected to competing nations like Vietnam and Mexico. These countries are perceived to possess a higher degree of competitiveness in the American market. Furthermore, key export commodities such as coal and crude palm oil (CPO) are experiencing cyclical price pressures. The recovery in demand for industrial metals from China also remains sluggish, as the country's economic stimulus measures are being implemented at a slower pace than anticipated.

However, Manilet pointed to factors that could bolster Indonesia's export figures. He noted that non-oil and gas exports to China demonstrated robust year-on-year growth of 17.7 percent from January to May 2026, providing a buffer against weakening demand in other markets. The sustained demand for nickel derivative products also presents an opportunity for continued export growth.

"Given these conditions, I estimate export growth in the second half will be between zero and two percent, with risks leaning downwards if tariff negotiations with Washington do not result in easing," Manilet stated. Previously, Trade Minister Budi Santoso indicated that Indonesian exports to the U.S. are currently subject to a 10 percent universal tariff, effective until July 24, 2026. This temporary measure replaces the reciprocal tariff policy previously invalidated by the U.S. Supreme Court. The U.S. government is set to establish new tariffs for its trading partners, including Indonesia, after the current universal tariff period concludes. The Indonesian government is actively engaged in negotiations with the U.S. to secure more competitive tariffs, aiming for a zero percent rate on certain commodities.

Data from Statistics Indonesia (BPS) revealed that Indonesia's non-oil and gas exports in May 2026 contracted by 4.5 percent year-on-year, reaching $22.45 billion. This decline was primarily driven by reduced exports of precious metals, jewelry, gemstones, metal ores, slag, ash, and iron and steel. The manufacturing sector, though still dominant in non-oil and gas exports with $19.05 billion, saw a 3.59 percent year-on-year contraction. Exports from the agriculture, forestry, and fishery sectors fell by 20.43 percent to $500 million, while mining and other sectors experienced a 7.03 percent decrease, amounting to $2.89 billion.

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With these conditions, I estimate export growth in the second half will be between zero and two percent, with risks leaning downwards if tariff negotiations with Washington do not result in easing.