Macro Strategy: The Rattle of The Tariff Tantrum

Stock Code	Last Price	Change	Change %
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AMMN	6,425	350	5.76%
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JSMR	4,290	240	5.93%
MDKA	1,645	230	16.25%

Macro Strategy

The Rattle of The Tariff Tantrum

The “Liberation Day Tariff” triggered shockwaves across global markets, with the financial channel posing the main risk to Indonesia.
The four key factors to monitor closely, as they directly influence investor preferences and the shift toward safe-haven assets.
Moving faster than competitors on negotiation could secure advantages to Indonesia, particularly in contested sectors

Trump Tariff Conundrum. Proclaimed as “Liberation Day”, Trump has unveiled a sweeping new trade policy that imposes a minimum 10% global tariff on all US imports beginning April 5. Starting April 9, steeper, country-specific tariffs will apply to around 60 nations. These enhanced tariffs are determined based on existing duties on US exports, trade restrictions, and alleged currency manipulation. China faces the highest tariff at 54%, followed by Vietnam at 46%, Taiwan and Indonesia at 32%, Japan at 24%, and the European Union at 20%. The situation has likely shifted closer to a worst-case scenario. In our view, the tariff announcement’s main implications are as follows:

The biggest concern is the risk of retaliation, though large-scale retaliation appears unlikely given Trump’s clear warning. Hence, negotiations are the most likely path going forward. From Asia, 17 countries, including Japan and India, have opted not to retaliate and instead engage in talks with the US Meanwhile, Indonesia, Cambodia, and Vietnam have pledged to reduce trade barriers, with Vietnam even offering a 0% tariff on US goods. China, on the other hand, responded with a 34% tariff on all U.S. imports effective April 10. While some exemptions exist, they have little to no meaningful impact on Indonesia’s exports.

In the short term, the tariffs are expected to raise U.S. inflation, increasing uncertainty over the trajectory of future Fed rate cuts. The decline in the 10-year UST yield to as low as 3.8% also reflects a weakening growth outlook. As recession risk looming, the FFR cuts expectation is now rising.

Although Indonesia’s economy is heavily supported by domestic consumption than international trade, the negative impact from the current tariff situation will be through financial channels. With global investors shifting to a risk-off stance, the IDR will likely come under pressure, requiring significant intervention from Bank Indonesia to maintain stability. Without such action, further capital outflows from the bond market could intensify downward pressure on the currency.