Webinar on Trade War vs Climate War : Indonesian Industry Faces Two Challenges

Background

In April 2025, US President Donald Trump reintroduced a reciprocal tariff policy through “Liberation Day Tariffs” that imposed a 10% base tariff on all imports, as well as additional tariffs of up to 54% for countries with a trade deficit against the US. Indonesia is included in the list of affected countries with an additional tariff of 32%, particularly on labor-intensive and manufactured products such as textiles, footwear, electronic components, and mild steel.

The United States is one of Indonesia’s export destinations where the country was a contributor to the national trade surplus in the 2015-2025 period. During the period January to March 2025, Indonesia exported a number of leading commodities to the United States. Among them are electrical machinery and equipment which recorded an export value of 1.2 billion US dollars or around Rp20.1 trillion. In addition, the footwear sector was also a major contributor, with an export value of US$657.9 million or equivalent to Rp11 trillion. This commodity accounts for around 9.01 percent of Indonesia’s total exports to the United States which reached 7.3 billion US dollars or around Rp122 trillion

Previously in 2022, the United States under the leadership of Joe Biden had issued regulations on the Inflation Reduction Act (IRA). This policy is known as the US climate policy to reduce inflation and increase investment in the green energy sector. Through fiscal capabilities in production tax credit incentives for components such as batteries, solar modules, and wind turbines, investment credits for new plants and clean industry capacity expansion, consumer credits for electric vehicles, solar panels, and home efficiency and local content requirements that encourage the use of materials from the US or free trade partner (FTA) countries.

These protectionist policies could potentially trigger other countries to issue similar regulations that could affect the international trade landscape. For example, the European Union has issued CBAM (Cross Border Adjustment Mechanism) which aims to avoid carbon leakage of imported goods. To fulfill this requirement, CBAM requires companies to report their emission records in the first phase or until 2025 and then companies are required to purchase CBAM certificates. Although CBAM will only be applied to steel, cement, fertilizer, aluminum, electricity and hydrogen commodities, the CBAM policy will potentially be expanded to other sectors.

Not only Western countries, other countries such as China and Canada have also strengthened green policies and are considering the implementation of emission-based regulations. In the ASEAN region, Singapore and Vietnam are moving quickly to integrate green principles in their industrial policies to remain competitive in the global supply chain. These trade wars and environmental policies have resulted in shifting investment and supply chain maps, with multinational companies considering relocating production to avoid the burden of tariffs and stringent environmental regulations.

On the other hand, Indonesia has renewed its climate commitment through the Enhanced NDC document that targets emission reductions of 31.89% independently and up to 43.2% with international support by 2030. In this context, the industrial sector is identified as the second largest emitter, contributing nearly 22% of total national emissions, equivalent to more than 170 million tons of CO₂e per year.

Sectors such as cement, steel, fertilizer, textiles, and paper-pulp face immense pressure to adopt low-carbon technologies, including process electrification, raw material substitution, energy efficiency, and the use of hydrogen or biomass. However, the adoption of these technologies requires large investments and uneven supporting infrastructure.

While the national industry is forced to invest in clean technology and process efficiency to respond to protectionist policies of export destination countries, it must also face the risk of rising costs and market access due to trade tariffs. This double pressure requires a resilient and adaptive national strategy. A strategy that does not rely solely on technology incentives or carbon pricing instruments, but also includes trade diplomacy, fiscal policy reforms, and strengthened cross-sector coordination.

The webinar Trade War vs Climate War: Indonesian Industry Faced with Two Challenges aims to discuss in more detail the geopolitical policies in international trade that affect the development of national low-carbon industries.

Objective: 

1. Analyzing the Impact of Global Trade Policies on National Industry Exports

    

2. Identifying Challenges and Readiness of Indonesian Industry in Transitioning to Low Carbon Production

    

3. Discussing Policy Strategies and Trade Diplomacy to Enhance Indonesia’s Industrial Resilience.