Uncertainty Looms Over Indonesia-US Trade Pact After Legal Blow in Washington

Analysts Say the Supreme Court Ruling Gives Indonesia Room to Reassess Its Commitments — and Perhaps Demand a Better Deal

The ink on the Indonesia-US reciprocal trade agreement had barely dried when the legal architecture underpinning it collapsed. President Prabowo Subianto signed the landmark deal in Washington on February 19, pledging to open Indonesia’s markets to 99% of American exports in exchange for a reduced US tariff rate of 19% — a hard-won concession from the original 32% levied under President Donald Trump’s “Liberation Day” tariff campaign. Then, just 24 hours later, the United States Supreme Court issued a 6-3 ruling that obliterated the legal basis for those very tariffs.

It is one of the more striking pieces of timing in recent economic diplomacy: a country concedes major market access to escape a tariff that the highest court in the land simultaneously declares unlawful. For Jakarta, the question now is not simply what the deal is worth — but whether it needs to be renegotiated entirely.

Background: The Tariff Threat That Brought Indonesia to the Table

To understand the Indonesia US trade pact uncertainty 2026, one must revisit April 2025, when Trump invoked the International Emergency Economic Powers Act (IEEPA) to impose sweeping “reciprocal tariffs” on imports from nearly every country on earth. Indonesia was hit with a 32% rate — a punishing levy on a nation whose exports, from garments and footwear to palm oil and electronics components, flow heavily into the American market.

Bloomberg reported that the two sides had been negotiating for months, with the final deal announced the same day Prabowo attended Trump’s inaugural Board of Peace summit. Under the White House’s own fact sheet, Indonesia agreed to eliminate tariff barriers on more than 99% of American products — spanning agriculture, health goods, seafood, automotive parts, and chemicals — while addressing longstanding non-tariff barriers such as local content requirements and import certification burdens. Indonesian companies also pledged to purchase around $33 billion in US goods, including soybeans, corn, cotton, and up to five million tons of wheat by 2030.

In exchange, Washington agreed to lower its tariff on most Indonesian exports from 32% to 19% — the same rate set for Cambodia and Malaysia. The agreement was signed by US Trade Representative Jamieson Greer and Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto, who hailed it as the beginning of a “new golden age” in bilateral ties.

The question that lingered, even at the signing ceremony, was straightforward: if Trump’s IEEPA tariffs were struck down by the courts, what exactly was Indonesia buying its way out of?

The Supreme Court’s Ruling: A Constitutional Reset Button

On February 20, 2026, Chief Justice John Roberts delivered the answer with characteristic precision. In Learning Resources, Inc. v. Trump, the Supreme Court held — in a 6-3 decision joined by both conservative and liberal justices — that IEEPA does not authorize the President to impose tariffs. As NBC News reported, the ruling invalidated the “reciprocal tariff” edifice that Trump had spent a year constructing.

The majority’s logic was clean. Tariffs are, constitutionally, a branch of the taxing power — a power explicitly assigned to Congress. IEEPA’s grant of authority to “regulate importation” does not mention tariffs or duties; no previous president had ever read it to confer such power; and invoking the court’s “major questions doctrine,” Roberts found no clear congressional authorization for the extraordinary unilateral authority Trump had claimed.

Justices Thomas, Alito, and Kavanaugh dissented, with Kavanaugh notably warning that the refund process for the estimated $160–175 billion in collected IEEPA duties would likely be a “mess” — a statement Trump later quoted approvingly at a White House press conference, calling the justices who voted against him a “disgrace.”

The ruling is best understood as a reset button on trade leverage — not as a return to the pre-2025 status quo. As WilmerHale’s trade analysis noted, the administration moved within hours to impose a new 10% global surcharge under Section 122 of the 1974 Trade Act — later raised to the statutory maximum of 15% — valid for 150 days. Critically, Section 232 national security tariffs on steel and aluminium remain untouched. For Indonesia, this means the threat of US tariffs has not vanished; it has simply changed shape.

Jakarta’s Immediate Response: Affirm the Deal, Reassess the Terms

The immediate Indonesian government position was to hold firm. Airlangga Hartarto confirmed that the agreement remained valid and that Jakarta intended to implement its commitments. Presidential communications echoed the same line. For a government that had invested enormous political capital — including a controversial $1 billion membership fee to join Trump’s Board of Peace — public retreat was not an option on day one.

But beneath the diplomatic composure, the mathematics have shifted considerably. Indonesia negotiated a 19% tariff rate to escape a 32% rate that is now legally void. Under the new Section 122 blanket tariff, Indonesian goods face a 15% rate — four percentage points lower than what Jakarta’s negotiators secured after months of intensive talks. Put differently: Indonesia locked in concessions calibrated to a threat the courts just nullified, while the US has since imposed a lower universal rate through a completely different legal mechanism.

As Jakarta Globe reported, Indonesian economist Faisal acknowledged the ruling as an opportunity to rethink trade strategy, while cautioning that uncertainty remains elevated given the administration’s stated intention to pursue further tariff action through Section 301 investigations and Section 232 reviews. “That means tariffs can still be maintained, even if at lower levels,” Faisal said, stressing that US trade policy remains fluid.

Analyst Perspectives: The Case for Renegotiation — and Its Limits

The impact of the US Supreme Court tariff ruling on Indonesia’s economy is more nuanced than a binary win-or-lose framing suggests. Analysts identify several dimensions worth parsing.

The leverage shift is real, but temporary. As Asia Times reported, the Supreme Court ruling offers ASEAN nations “breathing room — a period in which the asymmetry of bargaining power is somewhat reduced.” Section 122 is capped at 15% for just 150 days. After that, the administration has signaled it will push Section 232 and Section 301 investigations to restore targeted tariff pressure. The window for Indonesia to extract better terms is narrow.

Critical minerals complicate the calculus. A significant element of the February 19 deal was Indonesia’s commitment to lift restrictions on critical mineral exports — particularly nickel, of which Indonesia holds the world’s largest reserves. Washington was explicit that it wants to counter China’s stranglehold on minerals essential for defense manufacturing and the clean energy supply chain. This geostrategic dimension gives Indonesia real leverage that extends beyond any tariff negotiation. But Prabowo’s government has already reaffirmed that it will not reopen raw mineral exports — domestic processing requirements remain a red line — which limits how far any renegotiation can go on that front.

The deal’s non-tariff components may survive intact. Analysts note that Indonesia’s concessions on non-tariff barriers — accepting FDA standards, removing local content requirements for US companies, and addressing IP protections — reflect structural reforms Jakarta had an independent interest in pursuing. These are not hostage to IEEPA’s legal status. A renegotiation, if pursued, would likely focus on the tariff rate and purchase commitments rather than the regulatory framework.

Comparison with India is instructive. India, whose trade negotiators were on their way to Washington when the ruling landed, immediately paused talks and is now weighing options in a lower-tariff environment. The Global Trade Research Institute in New Delhi has explicitly called for a reassessment. Indonesia, having already signed, faces a higher bar — but the precedent from other countries reassessing their positions will not be lost on Jakarta.

Economic Implications: What Indonesian Exporters Actually Face

Indonesia runs a trade surplus with the United States — $17.9 billion in 2024 — and its export profile makes tariff levels acutely sensitive. Garments and footwear, Indonesia’s largest manufactured export categories to the US, face intense price competition and operate on thin margins. A 19% tariff versus a 15% blanket surcharge may seem like a minor variance, but for cost-sensitive supply chains already rerouting away from China, four percentage points can determine whether an order goes to Jakarta or Hanoi.

Textile and apparel producers in particular will be watching the deal’s implementation closely. The agreement included a commitment by the US to establish a mechanism allowing certain textile and apparel goods to receive a 0% tariff rate for a specified volume linked to imports of US cotton and fiber inputs — a provision with significant value for an industry that employs millions of Indonesians. Whether that mechanism survives the current legal uncertainty, or requires fresh congressional action to implement, remains an open question.

More broadly, as the Council on Foreign Relations noted, countries that negotiated IEEPA-based deals face a period of genuine ambiguity: “for US trade partners — including several that negotiated agreements intended to reduce IEEPA tariffs on their exports — the outlook is unclear.”

Broader Global Implications: The End of IEEPA-Era Trade Coercion

The Supreme Court’s decision does more than untangle any single bilateral deal. It closes the chapter on IEEPA as a trade coercion tool — the blunt instrument that drove dozens of countries to Washington’s negotiating table under duress. As Chatham House analysts assessed, the ruling signals “a shift toward slower, more procedurally constrained trade policy.” The administration retains meaningful authorities, but they come with checks: time limits, investigatory requirements, congressional thresholds, and judicial review.

For Southeast Asia as a whole, this recalibration matters. Vietnam is still negotiating. Thailand has not yet concluded an agreement. Both can now do so against a baseline of 15% rather than the threat of 32%–46% IEEPA rates. The competitive dynamic among ASEAN nations in attracting US supply chains — many of which fled China after the first Trump-era tariffs — becomes more level-footed in this new environment, but also more uncertain.

What is certain is that the era of unilateral tariff shock as the primary tool of American trade diplomacy has been judicially constrained. The White House has vowed to reconstruct its leverage through other means. For Indonesia, the coming weeks will determine whether the “new golden age” announced with fanfare on February 19 holds — or whether Jakarta uses the court’s reset button to negotiate terms more befitting a country that no longer faces the tariff it sacrificed so much to escape.

Conclusion: Jakarta’s Strategic Crossroads

The Indonesia-US trade pact, struck with ceremony and high-level symbolism, now enters a period of genuine uncertainty. The deal’s legal validity is not in question — both governments have affirmed its standing — but its economic rationale has been partially undermined by a court ruling that arrived the day after the signatures were affixed.

Indonesia is not without options. Its nickel reserves, its position as Southeast Asia’s largest economy, its role in Trump’s Gaza peace initiative, and the genuine interest of US businesses in accessing its 280-million-strong consumer market all give Jakarta meaningful cards to play. The Supreme Court decision on Trump tariffs and its implications for Indonesia are not necessarily catastrophic — but they do demand a more rigorous accounting of what was given, what was received, and whether the balance still makes sense.

Reassessing Indonesia’s commitments after the Trump tariff blow is not the same as walking away. It may be as simple as opening a quiet conversation with Washington about the zero-tariff textile provisions, or pressing for clarity on critical mineral cooperation terms. Done diplomatically, it is entirely consistent with the spirit of a deal that both sides called a beginning rather than an end.

The real test will come in the weeks ahead, as Trump’s alternative tariff authorities take shape, as refund litigation winds through the courts, and as other ASEAN nations recalibrate their own positions. Jakarta would do well to watch — and act — before that window narrows.