The International Monetary Fund (IMF) has long warned that a world splitting into rival trade and technology blocs would be poorer. Indonesia trades with and takes investment from both the United States and China, and joined BRICS in 2025. The data so far point to an economy that has held up, while showing signs of strain.

What the IMF has said in 2026

April World Economic Outlook (WEO). Published on 14 April, it listed "renewed trade tensions" and "worsening geopolitical fragmentation" among the downside risks (IMF). Chief economist Pierre-Olivier Gourinchas wrote that waves of trade restrictions from major economic blocs were "harming international cooperation and growth, but trade is also being rerouted through new partners and regional agreements" (IMF Blog).

July WEO Update. The IMF projected global growth of 3.0% in 2026 and 3.4% in 2027. It said "AI-driven demand is lifting countries integrated into the global technology value chain" (IMF). It kept Indonesia's forecasts at 5.0% for 2026 and 5.1% for 2027, IDNFinancials reported.

Staff research. A January 2023 IMF note estimated trade fragmentation could cost 0.2% to 7% of global output, and "with the addition of technological decoupling, the loss in output could reach 8 to 12 percent in some countries" (IMF Staff Discussion Note). A June 2026 IMF working paper found that several ASEAN countries saw disproportionate export growth in products targeted by the 2018–19 US–China tariffs, but warned those gains "can be offset over time by the higher long-term aggregate losses associated with trade fragmentation" (IMF).

October. The full October WEO is due on 13 October, during the Annual Meetings in Bangkok (12–18 October); the IMF scheduled its analytical chapters for release on 5 and 6 October (IMF; IMF). In her curtain-raiser speech on 7 October, Managing Director Kristalina Georgieva said "AI hardware and related tech products now account for more than one-tenth of world goods trade". She added that emerging markets face "higher funding costs, possibly wider spreads, and more volatile capital flows" (IMF).

Trading with both sides

Indonesia runs a deficit with China and a surplus with the US, according to Statistics Indonesia (BPS) non-oil and gas data:

China United States
Exports, Jan–Aug 2026 US$47.44bn (25.6% of non-oil exports) US$22.41bn (12.1%)
Imports, Jan–Aug 2026 US$66.64bn (42.4% of non-oil imports) Not reported
Non-oil balance, Jan–Jun 2026 Deficit of US$14.26bn Surplus of US$10.44bn

Sources: BPS data reported by Okezone via RCTI+ and Fortune Indonesia.

US tariffs and the trade deal

Date Event
April 2025 US announces a 32% "reciprocal" tariff on Indonesia (Forbes Australia); Trump restates the 32% rate in a July letter to Prabowo (Bisnis)
22 July 2025 Framework deal cuts the rate to 19%. Indonesia commits to remove export restrictions to the US on industrial commodities, "including critical minerals" (joint statement)
19 February 2026 Presidents Prabowo Subianto and Donald Trump sign the Agreement on Reciprocal Trade (ART) in Washington (Cabinet Secretariat)
20 February 2026 US Supreme Court rules that the International Emergency Economic Powers Act (IEEPA) does not authorise tariffs. A temporary import surcharge of up to 15% for up to 150 days under Section 122 follows (Congressional Research Service)
24 July 2026 New Section 301 tariffs: 10% for Indonesia, 12.5% for China (USTR)

The ART sets zero US tariffs on 1,819 Indonesian tariff lines, covering products such as palm oil and electronic components, including semiconductors, and takes effect 90 days after both sides complete legal procedures (RRI). NDNews could not confirm that it is in force. Trade Minister Budi Santoso said on 12 August: "Indonesia received the 10 percent rate because we already have an Agreement on Reciprocal Trade (ART) in place" (ANTARA). Importers are challenging the Section 301 tariffs in court (Orrick).

Chinese capital: nickel and EVs

Indonesia produced an estimated 62% of the world's mined nickel in 2024, according to the US Geological Survey. Chinese companies controlled about three-quarters of Indonesia's nickel smelting capacity as of 2023, according to a C4ADS report cited by Reuters. BYD opened a 150,000-vehicle-a-year EV plant in Subang, West Java, on 3 September (SMM).

In the second quarter Hong Kong was the top source of foreign direct investment (US$5.0 billion) and China third (US$1.7 billion). Investment Minister Rosan Roeslani said: "In this second quarter, for the first time in the past 10 years, China has invested more aggressively through Hong Kong" (RRI). The US ranked fifth in the first half. For the regional picture, see our ASEAN vs China investment analysis.

US-linked technology investment

Microsoft opened its first Indonesian cloud region in May 2025, part of a planned US$1.7 billion investment for 2024–28 (Microsoft). On 18 February 2026, Indonesian developer PT Galang Bumi Industri signed an agreement with US-based Essence Global Group and Tynergy Technology Corporation to build a semiconductor hub in Batam, with a first-phase commitment of about US$4.9 billion and no reported construction timeline (Indonesia Expat). In the same city, the Batam free-zone authority (BP Batam) said in May it had secured a US$5 billion AI data centre project by developer PT Equator Gate System Batam, which ANTARA reported is backed by Shenzhen-listed Chinese data-centre firm RangeIDC; the first step reported was a power purchase agreement with the state electricity company PLN (ANTARA).

BRICS

Brazil announced Indonesia as a full BRICS member on 6 January 2025 (BRICS Brasil). In July 2025, Trump threatened an extra 10% tariff on countries aligning with BRICS's "anti-American policies" (Bisnis). Indonesia has since signed the ART and received the 10% Section 301 rate, the lower of the two main tiers. Bank Indonesia said in May it would implement cross-border QRIS payments with China (Bank Indonesia).

The case for resilience

  • Growth was 5.29% in the second quarter, BPS reported on 5 August, with investment up 6.87% (CNBC Indonesia).
  • On 6 October the World Bank raised its 2026 forecast for Indonesia to 5.2% from 4.7%, citing domestic demand, government programmes and some spending brought forward (Fortune Indonesia).
  • Indonesia's 10% Section 301 rate, shared with Malaysia, is below the 12.5% applied to China, Vietnam, Thailand and Singapore (USTR; TNGlobal).

The vulnerabilities

  • Supply chains. IMF staff wrote in January that Indonesia "has not been able to gain yet from ongoing supply chain reconfigurations" and uses non-tariff barriers more than most peers (IMF Selected Issues).
  • Commodities. Animal and vegetable fats and oils, mineral fuels, and iron and steel led the US$6.09 billion non-oil surplus in August, according to BPS (Katadata). In her 7 October speech, Georgieva said AI-related trade is concentrated in the US, China and India, alongside unnamed Asian suppliers of chips, chip-making machines and robotics; the published text does not mention Indonesia.
  • Rupiah. Bank Indonesia raised its policy rate in May to support the currency and held it at 5.75% on 23 September (Bisnis). The rupiah closed at Rp17,887 per dollar on 7 October (Bisnis). Reserves were US$146.3 billion at the end of September, down from US$146.5 billion in August and equivalent to 5.3 months of imports (Bank Indonesia).
  • Capital outflows. Foreign investors had sold a net Rp82.55 trillion of Indonesian shares so far this year, Bisnis reported on 3 October (Bisnis).
  • MSCI. If "sufficient progress" on transparency is not evident by its November review, MSCI may consult on reclassifying Indonesia from Emerging to Frontier Markets (MSCI).

Does Indonesia "defy" the IMF?

No. The IMF has not forecast an Indonesian slump that the country is now defying: it expects growth of about 5%. Its research says gains from rerouted trade can prove temporary, and its staff wrote in January that Indonesia had not yet gained from supply-chain reconfiguration. The World Bank credits domestic demand and government spending for recent growth, commodities still lead the trade surplus, and the rupiah and foreign equity flows show strain (see our Indonesia vs Thailand comparison).

Key numbers

  • 5.29%: GDP growth, Q2 2026 (BPS)
  • 5.0% / 5.2%: 2026 growth forecasts for Indonesia from the IMF (July) and the World Bank (October)
  • 10% vs 12.5%: Section 301 tariff on Indonesia vs China
  • US$14.26bn: non-oil trade deficit with China, H1 2026
  • Rp82.55tn: net foreign selling of Indonesian shares in 2026 (Bisnis, 3 October)

What to watch

  1. The October WEO (13 October) and its new forecasts.
  2. MSCI's November review of Indonesia's market status.
  3. The ART's entry into force and court rulings on Section 301.
  4. Bank Indonesia's October meeting and the rupiah.

This article was researched with AI assistance and reviewed by the NDNews editorial team. It is based on official data and media reports as of 10 October 2026.