Indonesia’s sovereignty at risk: Consequences of trade agreement with US

Airlangga Pribadi Kusman and Imam Moeljadi

More than 60 years ago, Indonesia’s first president, Sukarno, warned that political independence meant little without economic sovereignty.

In his famous Trisakti doctrine, announced during the 1964 Independence Day speech, Sukarno argued that a truly independent nation must achieve three things: political sovereignty, economic self-reliance and cultural dignity.

He believed that former colonial powers would continue to dominate newly independent countries through economic dependency and political pressure, even after formal colonialism had ended.

Today, many Indonesian scholars and activists believe those warnings are becoming reality once again through the newly signed “Agreement on Reciprocal Trade” between Indonesia and the United States.

Negotiated throughout 2025 and finalised in Washington, DC in February 2026, the agreement was scheduled to take effect in May 2026. Supporters present the agreement as a modern trade agreement designed to reduce tariffs and improve economic cooperation.

Critics, however, argue that it represents a deeper restructuring of Indonesia’s political and economic sovereignty in favour of US strategic interests.

At the centre of the debate is a simple question: does the agreement create an equal partnership, or does it reinforce an unequal relationship in which Indonesia is expected to adapt to the priorities of a more powerful state?

Unequal partnership

On paper, the agreement covers familiar elements of contemporary trade agreements: tariffs, digital trade, export rules, investment regulations, security coordination and implementation mechanisms.

Yet the deeper concern raised by critics is that the agreement is not genuinely reciprocal. Instead, it establishes a framework in which Indonesia must align many of its economic and geopolitical policies with those of Washington, while the US assumes few comparable obligations.

One of the most controversial provisions reportedly requires Indonesia to coordinate aspects of its foreign policy and trade practices with US sanctions regimes and export-control systems.

Indonesia would also be expected to consult Washington before entering certain trade arrangements with third countries if those agreements could affect US interests.

Critics argue that such clauses effectively extend American strategic influence into Indonesian policymaking.

For many observers in the Global South, this reflects a familiar historical pattern. Powerful countries often use trade agreements not only to facilitate commerce but also to shape the political and economic behaviour of weaker states.

The language of ‘cooperation’ and ‘good faith’ may appear neutral, but the balance of power embedded within such agreements can produce relationships of dependency rather than partnership.

This concern resonates strongly in Indonesia because the country has long sought to maintain an independent foreign policy. Since the Bandung Conference of 1955, Indonesia has portrayed itself as part of a broader movement of postcolonial nations seeking autonomy from great-power domination.

This trade agreement, critics argue, risks undermining that legacy.

Human cost for Indonesia’s working classes

The social consequences of this “reciprocal trade’ agreement may be felt most sharply by ordinary people in Indonesia – especially workers, peasants, fishers and small entrepreneurs.

For farmers, the agreement is expected to increase imports of heavily subsidised US agricultural products, particularly soybeans. Indonesia would reportedly import millions of tons of American soybeans annually, creating intense competition for local producers. Similar pressures could affect horticultural sectors such as fruit farming.

Small farmers, who already struggle with volatile prices and rising production costs, may find it increasingly difficult to survive against large-scale industrial agriculture from abroad.

Fishers face similar challenges. Although the agreement includes regulations concerning sustainable fisheries and illegal fishing practices, critics argue that the removal of tariffs on US seafood imports could flood Indonesian markets with foreign products.

Small-scale fishing communities – already vulnerable to climate change, fuel costs, and declining fish stocks – may struggle to compete.

Industrial workers are also likely to feel the impact. One provision reportedly weakens Indonesia’s local content requirements (known domestically as TKDN), which were designed to encourage foreign companies to manufacture products locally and support domestic industries.

Without such requirements, multinational companies could increasingly export finished products directly into Indonesia without building factories or creating substantial local employment. This could accelerate deindustrialisation and contribute to job losses in manufacturing sectors.

The digital economy presents another area of concern. The agreement reportedly protects corporate algorithms from government disclosure requirements.

For ride-hailing drivers, delivery workers and other gig economy labourers, this could limit the Indonesian state’s ability to regulate platform companies and protect workers from algorithmic exploitation.

Around the world, digital platforms increasingly control wages, working hours and labour conditions through opaque systems that workers themselves cannot fully understand or challenge. Critics fear the agreement could strengthen these asymmetries of power.

Taken together, these pressures could ripple through Indonesia’s broader social fabric. Small traders, neighbourhood businesses and informal workers often depend on the spending power of farmers, factory workers and fishers. When those groups suffer economic decline, entire local economies can weaken.

Indonesia’s place

Beyond its immediate social effects, the agreement may reshape Indonesia’s long-term development strategy.

Indonesia possesses some of the world’s most important reserves of critical minerals, particularly nickel, which is essential for electric vehicle batteries and the global energy transition.

In recent years, Jakarta has attempted to use these resources to promote downstream industrialisation, encouraging domestic processing and manufacturing rather than simply exporting raw materials.

Critics argue that the agreement could weaken this strategy by granting greater access to US companies while easing restrictions designed to ensure local value-added production.

If Indonesia becomes primarily a supplier of raw materials while importing higher-value manufactured goods, the country could remain trapped in a dependent position within the global economy.

This reflects a broader historical problem faced by many developing nations. Colonial economies were often structured around the export of raw materials and the import of industrial products from richer countries. Postcolonial governments have long tried to escape this pattern through industrialisation and economic planning.

This agreement, opponents argue, risks reproducing those same unequal structures under the language of free trade.

The agreement also carries significant geopolitical implications. Indonesia has deep economic ties with China, which is one of its largest trading partners and a major investor in infrastructure and industrial projects.

Some provisions of the Indonesia–US agreement reportedly pressure Indonesia to align more closely with US definitions of ‘market economies’, potentially limiting cooperation with China in sectors such as shipping, ports and industrial technology.

For Indonesia, this creates a difficult dilemma. The country has traditionally sought to avoid becoming subordinate to any major power bloc.

Yet this agreement may constrain Jakarta’s ability to balance relationships between competing global powers.

A changing global order

The debate over this agremeent also unfolds against the backdrop of major changes in the global balance of power.

The US remains the world’s dominant military and financial power. But its global position is increasingly contested. Economic inequality within the US has grown sharply, its industrial base has weakened in some sectors, and prolonged military interventions have strained its resources.

At the same time, emerging powers, particularly within the Brics bloc, are gaining influence in global trade, finance and infrastructure development.

For critics, this shifting landscape makes this agreement especially troubling. They argue that Indonesia should diversify its partnerships and strengthen regional and Global South cooperation rather than binding itself too closely to US strategic priorities.

The broader issue is not simply trade policy. It is the question of whether developing nations can maintain meaningful sovereignty in a world still shaped by unequal power relations.

Sukarno’s vision of political and economic independence was rooted in the belief that formerly colonised peoples could collectively resist domination and build alternative paths of development.

Today, many Indonesians see the agreement with the US as a test of whether that aspiration can survive in the 21st Century.

The outcome will not affect Indonesia alone. Across the Global South, countries are confronting similar pressures as they navigate competition between major powers, global supply chains and the demands of international capital.

Indonesia’s experience with this “reciprocal trade” agreement may therefore serve as an important example of the difficult choices facing postcolonial nations in a rapidly changing world. – Globetrotter

Airlangga Pribadi Kusman is the director of postgraduate studies in political science at the Airlangga University in Indonesia. Imam Moeljadi is a researcher in the philosophy of political economy at the LogikaPolitik Institute.

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