Editor’s Note
This analysis examines the legal and strategic implications of a recent US Supreme Court ruling that curbed presidential authority over trade tariffs, highlighting its potential to reshape international trade negotiations.
JAKARTA – Andalas University Economics Observer Syafruddin Karimi assessed that the US Supreme Court’s decision to overturn the reciprocal tariffs of US President Donald Trump affirms the limits of executive authority in trade policy.
He said the decision forced the US government to change its strategy of pressuring its trading partners.
he told VOI on Sunday, February 22.
According to him, the risk of US poison pills emerging is even greater when it is difficult to maintain broad tariffs. The United States could potentially lock in its interests through articles including the right to unilateral (snapback) tariff increases, supply chain compliance obligations, restrictions on digital policy, and conditions for dealing with third countries.
he said.
He said that for Indonesia, signing a bilateral trade agreement (ART) RI-US on one hand could open opportunities for stability of market access, but on the other hand, if it contains detrimental clauses, there is a risk of limiting policy space.
Karimi said the US has signaled that the trade deal should be honored even if the tariff arrangement changes, meaning Indonesia is bound by the deal’s outcomes regarding tariffs despite a universal tariff reduction.
According to him, the biggest risk is not only on the amount of tariffs but on provisions that limit national policies.
He gave examples, such as standard obligations for cross-border data, intellectual property protection that has the potential to increase drug prices, procurement rules that weaken domestic industry, non-discrimination provisions that conflict with manufacturing programs, even a clause that links tariff preference to a certain foreign policy.
he said.
He said that in anticipation, the Indonesian government needs to take three main steps, namely auditing clauses, strengthening bargaining position, and mitigating economic impact.
Karimi said that first, the government needs to conduct a comprehensive assessment for potentially harmful articles, such as the right to unilateral tariff increases, automatic inspection clauses that trigger penalties, restrictions on digital policies and digital service taxes, monopolies that strengthen intellectual property and pharmaceutical provisions, very strict rules of origin, and articles that limit diversification of trade partners.
He said that second, the technical implementation should be tailored to the interests of the national industry, including a priority product list, a timeline for measurable tariff reductions, customs facilitation, and establishing a rapid consultation mechanism to avoid escalation of disputes over additional tariffs.
Furthermore, third, the government needs to prepare an economic adaptation package, such as incentives to increase value-added export productivity, strengthening tracking systems (traceability) for compliance with labor and environmental standards, supporting export financing, and a market diversification strategy in anticipation of trade diversion.
According to him, the impact on Indonesia’s economy will depend heavily on the quality of the clauses. Fair and balanced clauses can maintain an investment climate, reduce risk premiums, strengthen exports, and protect policy space for industry.
Meanwhile, biased provisions have the potential to increase production costs, suppress labor-intensive sectors, increase exchange rate uncertainty due to market sentiment, and lock in a trade structure that is more profitable for the US side after changes in the tariff arrangement.
