ASIATODAY.ID, YOGYAKARTA – Amid looming U.S. trade tariffs, Indonesia’s vast nickel reserves may serve as a powerful bargaining tool in negotiations with Washington.
This view was shared by Mailinda Eka Yuniza, Professor of Administrative Law at Gadjah Mada University (UGM), as the U.S. under President Joe Biden enforces reciprocal tariffs of up to 32% on imports from 10 countries, including Indonesia.
While the policy is still under a 90-day delay period effective from April 9, 2025, Mailinda believes Indonesia is well-positioned to negotiate, thanks to its strategic supply of critical minerals like nickel, which are vital to global tech and defense industries.
According to Mailinda, Indonesia controls roughly 34% of the world’s nickel reserves, giving it a dominant role in global supply chains. She points out that other major producers like China have used export restrictions to exert leverage in trade disputes.
“This is not just a theoretical position. Both China’s and Indonesia’s potential restrictions have been cited as non-tariff barriers in the latest National Trade Estimate Report on Foreign Trade Barriers by the U.S. Trade Representative,” she stated on Monday, May 19, 2025.
Despite this strategic advantage, Mailinda warns that Indonesia faces a dilemma: whether to leverage its mineral dominance in the short term or stay committed to long-term industrialization and downstream processing.
“As a developing country, Indonesia may not be able to withstand the prolonged financial impact of high tariffs. The government appears to be adopting a cooperative approach, offering concessions such as reducing import quotas and easing local content requirements for U.S. electronics,” she noted.
However, such compromises could jeopardize the country’s mineral downstreaming policy, anchored by Law No. 3 of 2020, which has attracted major investments, including the establishment of state-owned enterprises like Danantara to boost domestic mineral processing.
TIFA Reopening: A Double-Edged Sword?
One potential negotiation pathway could involve reactivating the Trade and Investment Framework Agreement (TIFA). However, Mailinda cautioned that a new agreement might open the door for increased U.S. access to Indonesia’s critical minerals.
“Indonesia has shown a willingness to deepen collaboration in the critical mineral supply chain, although the scope and mechanisms remain unclear,” she said.
She also noted that Indonesia’s current laws prohibit the export of raw mineral ores, suggesting that any new trade agreement allowing broader U.S. access would require major revisions to domestic policies and regulations.
“If the U.S. pushes for widespread market liberalization in this sector, Indonesia would have to undergo structural policy changes—beyond mere diplomatic commitments,” she warned.
Mailinda concluded by expressing concern over the growing trend of exclusive bilateral deals, which could threaten the foundation of a fair global trading system.
“If this trend continues, the world may drift away from global cooperation and toward fragmented alliances among select groups of nations,” she emphasized. (AT Network)
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