China Won’t Retaliate Against US-Indonesia Trade Deal, Focusing Instead on Washington

Beijing is unlikely to retaliate against Indonesia following its recent trade agreement with the United States, instead directing any response towards Washington, according to geopolitical analysts. This approach reflects China’s assessment that the US, not Indonesia, is the primary driver of the trade dynamics.

The US-Indonesia Agreement on Reciprocal Trade

On February 19, 2026, Indonesia and the United States signed the Agreement on Reciprocal Trade (ART), establishing a 19% tariff level on many goods and reshaping their commercial relationship [1]. The agreement includes a provision requiring Indonesia to implement measures mirroring US customs duties or sanctions on “third countries,” widely interpreted as a move to limit Chinese exports transshipped through Indonesia [2].

Why China Won’t Target Indonesia

Despite initial concerns about potential economic retaliation from China, experts suggest Beijing views Indonesia as responding to pressure from the US, rather than initiating an aggressive stance. China’s official rhetoric consistently frames the US as the provocateur and positions itself as a defender of trade multilateralism [1]. This is a standard diplomatic approach China has used in response to numerous US trade agreements across Asia and beyond.

China’s tolerance for setbacks is high when the geopolitical and commercial stakes are not directly threatening to its core economic interests. Similar to its response when Panama shifted away from Beijing’s Belt and Road Initiative, China is likely to prioritize maintaining its economic ties with Indonesia over punitive trade measures [1].

Strong Economic Ties Between China and Indonesia

China and Indonesia maintain deep economic connections, with China being Indonesia’s largest trading partner. A significant volume of goods flows between the two countries under preferential terms, including those established through ASEAN frameworks [1]. China has too invested heavily in economic corridors, bilateral initiatives and industrial cooperation within Indonesia, representing substantial capital and livelihoods intertwined with the Indonesian economy.

Strategic Considerations

Retaliating against Indonesia could push Jakarta closer to Washington, a scenario China aims to avoid. Instead, Beijing appears to be adopting a strategy of diplomatic rhetoric while focusing on expanding commercial ties where it holds a comparative advantage [1]. This approach recognizes Indonesia’s position as a nation balancing competing interests from both the US and China.

Key Terms of the US-Indonesia Agreement

The U.S.-Indonesia Reciprocal Trade Agreement focuses on reciprocity, regulatory alignment, and supply-chain integration, rather than broad tariff elimination [2]. Key provisions include:

• The United States limits incremental “reciprocal tariff” surcharges to 19% on most Indonesian goods.
• Zero reciprocal tariff treatment for certain listed categories of Indonesian goods.
• Preferential treatment for Indonesian textile and apparel exports using U.S.-produced inputs.
• Indonesia commits to structural reforms, including reducing non-tariff barriers and modernizing customs procedures [2].

US Trade Deficit with Indonesia

The United States currently has a $23.7 billion goods trade deficit with Indonesia, its 15th largest [3].

China’s measured response to the US-Indonesia trade agreement is not a sign of weakness, but a calculated decision based on its economic interests and strategic considerations. Beijing understands the complexities of US-China rivalry and is unlikely to jeopardize its relationship with Indonesia over a trade deal that doesn’t directly threaten its core interests.