Indonesia’s Strategic Legal and Economic Response to the US–China Trade War: Implications for Global Value Chains, Foreign Investment and MSMES

Zurria Sakinah; Mumtaz Muzaffar; Maudy Farras Raihan

doi:10.21107/tlr.v7i2.30350

Indonesia’s Strategic Legal and Economic Response to the US–China Trade War: Implications for Global Value Chains, Foreign Investment and MSMES

Zurria Sakinah, Mumtaz Muzaffar, Maudy Farras Raihan

Abstract

This study aims to analyse Indonesia’s legal and economic responses to the global trade tensions triggered by the United States–China tariff war, with a particular focus on their impact on Indonesia’s export-import structure, supply chain efficiency, and foreign direct investment (FDI) inflows. Employing a normative juridical method, supported by a policy and law-and-economics approach, this research examines international trade law frameworks, ratified agreements, and national policies in the context of global disruptions. The findings reveal that Indonesia, while not directly involved in the tariff conflict, has been significantly affected through rising production costs, decreased export competitiveness, and increased vulnerability of Micro, Small, and Medium Enterprises (MSMEs) in sectors such as textiles. Although trade agreement ratifications (e.g., RCEP, AFTA) offer strategic potential, bureaucratic inefficiencies and legal uncertainty continue to hinder optimal implementation. The study concludes that while Indonesia has adopted several adaptive measures such as market diversification, import substitution, and investment law reforms, structural challenges remain. To strengthen its role in global supply chains and enhance long-term resilience, Indonesia must integrate trade policy with regulatory enforcement, infrastructure development, and MSME empowerment. Recommendations include harmonising national trade regulations with international standards, optimising trade agreement benefits, and ensuring policy consistency across sectors.

Keywords

US–China trade war; International trade law; MSMEs; Investment policy

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DOI: https://doi.org/10.21107/tlr.v7i2.30350