Indonesia’s trade agreement with the United States, signed in February 2026, contains provisions that might significantly constrain Jakarta’s economic and digital engagement with China, revealing the fragility beneath what appeared to be an increasingly close Indonesia–China partnership. Closer cooperation with one superpower should not come at the expense of constructive engagement with another. Maintaining this equilibrium will remain one of the most important tests of Indonesian diplomacy.
During the presidency of Joko Widodo, China became more central to Indonesia than at any point in the past. Widodo left office with China as Indonesia’s second-largest source of foreign investment. China also emerged as the largest export destination for Indonesia’s nickel-processing hubs that supported Indonesia’s ambition to build a downstream mineral industry.
Through these developments, Widodo transformed the Indonesia–China comprehensive strategic partnership from a largely diplomatic symbol into one underpinned by significant economic cooperation.
This impression appeared to deepen during the first year of Prabowo Subianto’s presidency. Jakarta seemed open to Beijing’s proposal for joint development in the South China Sea through a controversial joint statement. A 2+2 dialogue mechanism was established between their foreign and defence ministries in April 2025. Two months later, they inaugurated an integrated electric-vehicle battery manufacturing centre in Indonesia. Against this backdrop, some observers began to argue that Indonesia was ‘sleepwalking into strategic alignment with China’.
Yet the trajectory appeared to shift in the second year Prabowo’s presidency. In July 2025, the framework for a US–Indonesian reciprocal trade agreement was announced, with the Agreement on Reciprocal Trade signed in February 2026. Under the arrangement, US tariffs on Indonesian goods would decrease from 32 per cent to 19 per cent. Though the reduction was welcomed, the agreement was widely perceived in Indonesia as unfair. The decision raised questions about Indonesia’s bargaining power in negotiations with Washington while also casting uncertainty over the future of Indonesia–China strategic relations.
Three provisions of the agreement are particularly notable.
Article 3.3 on digital trade stipulates Indonesia must communicate with the United States before entering into a new digital trade agreement with another country that could jeopardise essential US interests. It represents a clear attempt by Washington to constrain Indonesia’s cooperation with China in the digital economy. China’s Digital Silk Road already has a strong presence in Southeast Asia, and Indonesia is among its key destinations in the region with Chinese firms accounting for 44 per cent of Indonesia’s e-commerce market.
Article 5.1 requires Indonesia adopt equivalently restrictive measures if the United States imposes trade restrictions on imports from a ‘third country’ for economic or national security reasons. This clause could constrain Indonesia’s economic engagement with China — Washington’s principal strategic competitor.
Article 6.1 deals with critical minerals. It requires Indonesia to restrict foreign-owned processing facilities’ excess production by ensuring conformity with Indonesia’s mining quota. And it bars foreign-owned industrial parks and processing facilities from receiving preferential legal entitlements.
While the language of ‘foreign-owned’ is nominally neutral, it obscures a specific reality — a substantial majority of Indonesia’s nickel processing facilities are backed by Chinese capital. The industrial parks in Morowali, Weda Bay and elsewhere were built on Chinese investment — the very foundation of the economic partnership that Widodo cultivated. Article 6.1 effectively subjects that foundation to new restrictions negotiated not with Beijing but with Washington.
Collectively, these provisions of the agreement restrict a wide spectrum of Indonesia’s engagement with China. Despite the comprehensive strategic partnership supposedly being at its strongest, Jakarta obliged to the provisions. Indeed, by agreeing to controversial provisions that could potentially target a ‘third country’, Indonesia appears willing to disregard China’s strategic interests.
This highlights a key difference between Widodo and Prabowo in managing relations with major powers. Widodo maintained close engagement with China but not necessarily at the expense of US–Indonesian relations. By contrast, Prabowo appears to accommodate US interests in a manner that risks undermining Indonesia’s strong engagement with China, albeit incidentally.
Despite the positive trajectory of the post-Suharto era and Widodo’s further deepening of economic ties, Indonesia–China relations still rest on a fragile foundation.
On the Chinese side, Beijing frequently emphasises multilateralism and engagement with the Global South, including through its vision of a ‘community of shared future’. Yet if China seeks to maintain Indonesia as a key partner amid growing geopolitical competition, it must ensure that the relationship rests on deeper and more solid foundations. A purely pragmatic partnership driven by short-term economic interests may prove insufficient.
The inaugural 2+2 meeting of foreign and defence ministers in April 2025 signalled a potential shift toward a more institutionalised security partnership. But without concrete forms of cooperation this momentum risks dissipating before it can fully take root.
For both Indonesia and China, this episode provides a cautionary note. A foreign policy driven by short-term gains risks eroding the country’s credibility in the eyes of its partners — and credibility, once lost, is not easily recovered. Thus, engagement with major powers must be managed both pragmatically and principally.
For Indonesia, whose long-standing foreign policy tradition emphasises strategic autonomy and balanced diplomacy, strong partnerships with both the United States and China are not mutually exclusive. Indeed, cooperation with both in an era of intensifying great-power rivalry will be vital. But absent deeper foundations for cooperation with China, the opportunity for a truly comprehensive and strategic partnership with one great power will remain limited.
Klaus Heinrich Raditio – Driyarkara School of Philosophy
Ardhitya Eduard Yeremia – Universitas Indonesia
Ardhitya Eduard Yeremiais Assistant Professor at the Department of International Relations, Universitas Indonesia.
Klaus Heinrich Raditio is Lecturer in Chinese Politics at the Driyarkara School of Philosophy, Jakarta.
https://doi.org/10.59425/eabc.1777370400