Strategic Crossroads: Charting The Future Of US-Indonesia Relations – OpEd

The relationship between the Republic of Indonesia and the United States of America in the 21st century represents a crucial nexus of democratic values, strategic interests, and economic potential in the dynamic Indo-region Pacific.

As the world’s third- and second-largest democracies respectively sharing interests common in regional stability maritime and security prosperity economic, the partnership steadily has evolved.  Diplomatic ties established in 1949 deepened significantly post-Indonesia’s democratization in 1998 in culminating the 2010 Comprehensive Partnership and subsequent upgrades to Strategic Partnership in 2015 and recently most a Comprehensive Partnership Strategic (CSP) in November 2023.  This evolution underscores a shared commitment to broaden and deepen cooperation across security, political, and economic socio-cultural fields.

Navigating the complexities of the 21st century, the U.S.-Indonesia relationship has evolved into a Strategic Comprehensive Partnership. This requires continuous adaptation, particularly in managing economic interdependence, balancing geopolitical interests, and addressing differing policy priorities. Proactive Indonesian diplomacy and targeted engagement strategies are essential to fully realize this partnership’s potential.

A significant test for the relationship’s adaptability arose during the administration of President Donald Trump (2017-2021). The “America First” doctrine signaled a shift towards unilateralism and protectionism, demanding adjustments from partners like Indonesia. Concerns regarding trade policies, particularly the review of Indonesia’s eligibility for the Generalized System of Preferences (GSP) program—which provides duty-free access for certain exports to the US market—were significant. The threat of GSP removal was ultimately averted after lengthy negotiations, which created trade tensions and highlighted the inherent vulnerabilities of a more transactional US approach.

Trump’s rhetoric and policies led to a noticeable decline in favorable views of the US among Indonesians, dropping nearly 20 points from Obama’s era to 43% in 2018. This period underscored Indonesia’s need to navigate its foreign policy with the US, balancing its crucial economic ties with Washington while upholding its long-standing “aktif bebas” (independent active) foreign policy stance. This was particularly important amidst heightened US-China tensions affecting the region, including the South China Sea, where Indonesia has vital interests around the Natuna Islands. Indonesia managed to engage pragmatically while strengthening ties with its partners.

Despite the formal strengthening of ties, the Indonesia-US relationship still encounters persistent challenges. A primary hurdle is Indonesia’s ongoing effort to balance its relationships with both the United States and China, its largest trading partner and a major investor in infrastructure. Jakarta prioritizes maintaining its strategic autonomy and often resists being drawn into zero-sum geopolitical competition. This leads to policy stances that may diverge from Washington’s preferences on certain global issues. Perceptions in Indonesia about U.S. foreign policy are occasionally influenced by issues unrelated to the bilateral relationship, such as conflicts in the Middle East, which can also affect public opinion and diplomatic relations.

Additionally, the U.S. strategy toward China does not always align seamlessly with Indonesia’s development-focused priorities. While security cooperation, particularly in counter-terrorism and maritime security, remains strong, U.S. engagement in large-scale infrastructure projects has fallen behind China’s Belt and Road Initiative investments. Consistently following through on US initiatives can be challenging due to the complexities of the American political system and changing domestic priorities. Trade frictions, including historical disputes and the potential effects of broader US tariff policies, are ongoing concerns that require careful management.

The economic aspect of the relationship is substantial and reflects its complexities, holding significant potential for growth. According to data from the US Trade Representative (USTR), total bilateral trade in goods reached an estimated $38 billion in 2024. US exports to Indonesia amounted to $10.2 billion, marking a 3.7% increase from 2023, while US imports from Indonesia totaled $28.1 billion, up 8% from the previous year. This resulted in a US goods trade deficit of $17.9 billion with Indonesia in 2024, widening by 5.4% compared to 2023. Data from the Observatory of Economic Complexity (OEC) for 2023 shows that the US was Indonesia’s largest export destination, with exports valued at $27.9 billion, following China. Additionally, the US ranked as Indonesia’s fourth-largest source of imports, totaling $11 billion. Indonesian exports to the US typically include footwear, textiles, agricultural products (such as palm oil, although sensitive), rubber goods, and machinery. Principal US exports include soybeans from Indonesia, aircraft machinery, mineral fuels, and cotton. While data for 2025 is not yet available, the figures for 2024 indicate a continued imbalanced growth trajectory in bilateral trade. This highlights the importance of the US market for Indonesia and the persistent trade deficit for the US.

To enhance the bilateral relationship and unlock its full potential under the Strategic Comprehensive Partnership, Indonesia should pursue a multi-pronged strategy.  Firstly, continued proactive and sophisticated diplomacy is essential in clearly articulating Indonesia’s interests and navigating the great power dynamic without sacrificing its independent foreign policy principles. Strengthening ASEAN, particularly economic unity and trade, can provide Jakarta with greater leverage in negotiations with major powers. Secondly, Indonesia should actively promote cooperation in areas of clear mutual benefit that align with both U.S. strategic interests and Indonesia’s development goals. Key sectors include the digital economy, the renewable energy transition (with Indo

nesia leveraging its resources for green technology), critical minerals supply chains (despite slow progress on a specific FTA), public health, and food security—a stated priority of the current Indonesian administration.  Thirdly, significantly expanding people-to-people ties through educational exchanges (such as Fulbright and YSEALI), cultural programs, and tourism can foster deeper understanding and strengthen goodwill beyond government interactions. A concrete proposal is to reinvigorate the Trade and Investment Framework Agreement (TIFA) as a primary mechanism for addressing trade barriers and promoting investment. This could involve establishing dedicated working groups under the CSP focused on facilitating cooperation in critical minerals and the green energy transition, aiming for tangible outcomes and joint projects.

In conclusion, the 21st-century relationship between Indonesia and the United States has evolved into a Comprehensive Strategic Partnership, highlighting their shared interests and values. However, realizing the potential of this enhanced status requires more than just words; it demands commitment from both sides. The U.S. must follow through on initiatives despite changes in domestic politics, while Indonesia must skillfully navigate the complexities of the geopolitical landscape, especially regarding the U.S.-China dynamic.

Recommendations emphasize leveraging CSP within the framework to enhance cooperation in mutually beneficial sectors, such as sustainable critical development supply chains and the digital economy. This includes proactively managing trade friction mechanisms, like TIFA, significantly increasing investments in educational and cultural exchanges to foster long-term relationships, and maintaining a robust security dialogue. By prioritizing tangible cooperation and constructively grounding the partnership in shared principles of democracy and mutual respect for strategic autonomy, Indonesia and the US can strengthen their bond and significantly contribute to a prosperous, stable, free, and open Indo-Pacific for decades to come.

The opinions expressed in this article are the author’s own.

References

• Simpson, Bradley R. Economists with Guns: Authoritarian Development and U.S.-Indonesian Relations 1960-1968, Cambridge, MA: Harvard University Press, 2008.
• Gardner, Paul F. Shared Hopes, Separate Fears: Fifty Years of U.S.-Indonesian Relations Boulder, CO: Westview Press, 1997.
• Verico, Kiki Indonesia’s International Economic Strategies: A Critical Analysis of U.S. Engagement Singapore: Palgrave Macmillan, 2023