Indonesia’s export performance is expected to come under greater pressure in the second half of 2026, with economists projecting export growth of only 0–2% amid mounting external challenges. The outlook has deteriorated following the country’s first monthly trade deficit in six years, while uncertainty surrounding U.S. tariff policy, weaker commodity prices, and slowing global demand are expected to weigh on export momentum in the months ahead. Although stronger demand from China and expanding trade with India continue to provide some support, analysts believe these markets are unlikely to fully offset broader global headwinds.
The warning follows data released by Statistics Indonesia (BPS), which reported a trade deficit of USD1.61 billion in May 2026, ending an unprecedented streak of 72 consecutive months of trade surpluses. The reversal marks a significant shift for Southeast Asia’s largest economy, where exports have played a crucial role in supporting growth amid a challenging global environment.
According to Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (CORE) Indonesia, the full impact of U.S. tariff measures has yet to materialize because adjustments in global supply chains typically occur with a time lag. He said the effects of the tariffs are expected to become much more apparent during the second half of the year, as exporters begin to feel the consequences of changing trade conditions.
The United States is currently imposing a universal 10% tariff on Indonesian products through July 24, 2026. After that deadline, Washington is expected to determine its longer-term tariff framework. The Indonesian government is continuing negotiations with U.S. officials in an effort to secure lower tariff rates and has reportedly sought zero tariffs for several strategic export commodities. Yusuf noted that the outcome of those negotiations will largely determine Indonesia’s export performance for the remainder of the year. Under current conditions, he expects export growth to remain between zero and two percent, with downside risks increasing if the negotiations fail to deliver meaningful tariff relief.
Industry representatives argue that tariffs are only one part of the broader challenge. Toto Dirgantoro, Secretary General of the Indonesian Exporters Association (GPEI), said the deterioration in Indonesia’s trade performance also reflects weakening global economic conditions. He attributed the decline in May exports to a combination of falling commodity prices, softer international demand, and domestic competitiveness issues that have reduced the country’s ability to maintain export growth.
The latest trade data illustrate those pressures. Indonesia’s non-oil and gas exports totaled USD22.45 billion in May 2026, down 4.5% compared with the same month last year. The sharpest declines were recorded in precious metals and jewelry, metal ores, and iron and steel products, sectors that have been particularly vulnerable to weaker industrial activity and slowing manufacturing demand across major export markets.
Despite the challenging outlook, China continues to serve as Indonesia’s largest export destination and remains an important source of resilience. According to BPS, non-oil and gas exports to China increased by 17.7% during the January-May 2026 period compared with a year earlier, largely driven by shipments of downstream nickel products. The increase reflects Indonesia’s long-term strategy of encouraging domestic mineral processing to generate higher-value exports instead of relying on raw commodity shipments.
India is also emerging as an increasingly important alternative market. As trade tensions and protectionist policies reshape global commerce, more Indonesian exporters are seeking opportunities in India to diversify their customer base and reduce dependence on traditional export destinations. While expanding access to new markets could strengthen Indonesia’s export resilience over time, analysts caution that diversification alone will not fully compensate for weaker demand in major global economies.
Beyond the immediate challenges facing Indonesia, the country’s export outlook reflects broader shifts in the global trading environment. Many economies continue to grapple with slower growth, elevated interest rates, and geopolitical uncertainty, all of which have weighed on manufacturing activity and international trade flows. At the same time, governments around the world have increasingly adopted industrial policies and protective trade measures aimed at strengthening domestic industries, creating a more fragmented and competitive global trading system.
Commodity prices also remain a critical factor for Indonesia. As one of the world’s leading exporters of coal, palm oil, nickel, and other natural resources, the country’s export earnings remain closely tied to global commodity cycles. Even when export volumes remain stable, declining prices can significantly reduce export revenues and weaken the overall trade balance.
Nevertheless, Indonesia’s downstream industrialization strategy continues to provide a degree of optimism. Investments in nickel processing and battery materials have helped increase the value of exports and strengthen Indonesia’s position within global electric vehicle supply chains. However, demand for these higher-value products ultimately depends on global manufacturing activity and investment, meaning they remain vulnerable to broader economic slowdowns.
Looking ahead, Indonesia’s export performance during the second half of 2026 will largely depend on two interconnected factors: the outcome of tariff negotiations with the United States and the pace of recovery in global demand. If tariff uncertainty persists and international economic conditions remain weak, export growth is likely to stay subdued, with economists expecting gains of no more than 2%. While stronger trade with China and expanding commercial ties with India provide important sources of support, they are unlikely to fully offset the combined effects of weaker commodity prices, slowing global demand, and an increasingly uncertain international trade environment.
