The Indonesian and United States governments have reached an agreement to reduce tariffs to zero percent on a number of Indonesian products. Coordinating Minister for Economic Affairs Airlangga Hartarto stated that the agreement on reciprocal trade documents lists 1,819 product tariff lines that receive zero percent tariffs, including palm oil, coffee, cocoa, spices, rubber, electronic components, including semiconductors, and aircraft components.
Meanwhile, for textile and apparel products, Coordinating Minister Airlangga stated that the United States is also implementing a zero percent tariff through a tariff rate quota (TRQ) mechanism, which is foreseen to benefit four million workers in this sector and significantly impact 20 million Indonesians. As part of the reciprocal agreement, Indonesia is also committed to providing a zero percent tariff facility for several key products from the United States, particularly agricultural commodities such as wheat and soybeans. According to Airlangga, this step ensures that the public is not burdened with additional costs for products made from imported raw materials.
The recent reciprocal trade agreement between Indonesia and the United States raises an important analytical question: Does deeper economic integration enhance Indonesia’s strategic position in the international system, or does it risk constraining national sovereignty through structural dependence?
I argue that the agreement does not undermine Indonesia’s formal political sovereignty. However, it does narrow economic policy space and may generate asymmetric interdependence in key strategic sectors. Whether this results in enhanced national resilience or structural vulnerability depends primarily on Indonesia’s domestic industrial strategy and its capacity for diversification.
Using Liberal Institutionalism and Dependency Theory as analytical frameworks, I argue that the agreement’s long-term impact depends primarily on Indonesia’s domestic industrial capacity and strategic governance. Sovereignty in this context is not surrendered but structurally reshaped.
Sovereignty and policy space in the global economy
In contemporary political economy, sovereignty is no longer only about absolute autonomy. Currently, states operate within institutional frameworks such as the World Trade Organization and bilateral trade regimes that shape policy options. Sovereignty today is better understood as structured autonomy, which is the ability to pursue national objectives within agreed constraints. In other words, trade agreements do not eliminate sovereignty, but rather redefine the tools available to governments.
The first perspective, liberal institutionalism, sees interdependence as potentially stabilizing and mutually beneficial. From this perspective, trade agreements are seen as increasing predictability, reducing transaction costs, embedding dispute-resolution mechanisms, and encouraging long-term investment. Contrary to what it seems, policy constraints are interpreted as credibility-enhancing commitments. Indonesia can signal policy stability and strengthen investor confidence by reducing discretionary tariffs or restrictive regulations.
On the other hand, interdependence produces mutual vulnerability. The United States can bear the costs and consequences of disruptions to palm oil and/or nickel supply chains if Indonesia’s supply is considered important. This highlights that asymmetry in power does not automatically imply domination. Instead, under this framework, reduced policy space may enhance efficiency, competitiveness, and integration into global value chains.
Secondly, from a dependency theory perspective, there are at least three aspects that offer a structural critique of global economic integration. The first is the core-periphery dynamics. The global economy is divided between two core states: one that exports capital, and the peripheral states that supply raw materials. Trade liberalization can intensify this hierarchy if developing countries (peripheral states) remain locked into low-value production.
The second aspect is constrained developmental tools. Historically, late industrializers (usually the peripheral states) used tariffs, subsidies, and state interventions to support domestic industries. In this case, limiting said instruments can and may reduce Indonesia’s capacity to pursue industrial upgrading. Hence, from this perspective, reducing economic policy space risks can lead to premature liberation if done without sufficient technology maturity, which can further weaken domestic industries rather than strengthen them.
The third aspect concerns asymmetric interdependence as structural power. It creates leverage for the less dependent party. If Indonesia becomes heavily reliant on US markets, investment, and/or technology, its policy autonomy may be indirectly constrained. Even though structural power does not necessarily create political control, heavy economic reliance can still shape policy boundaries.
Structural power does not require overt political control. Economic reliance alone can shape policy boundaries.
The answer: conditional sovereignty
Both theoretical perspectives converge on one conclusion: outcomes depend on domestic capacity. The Indonesia–United States reciprocal trade agreement does not mean a reduction in Indonesia’s (as a peripheral state) sovereignty, as its political authority remains fully intact. However, the agreement recalibrates economic policy space and increases the possibility of asymmetric interdependence.
From a Liberal Institutionalist perspective, integration creates opportunities for investment, growth, and credibility. On the other hand, from a Dependency Theory perspective, premature liberalization may reinforce hierarchical economic structures. In the contemporary global economy, sovereignty is no longer defined by territorial isolation only but by the capacity to shape interdependence. The key factor will not be the agreement itself, but Indonesia’s ability to convert integration into structural leverage rather than dependency.
If Indonesia diversifies its trade partners, strengthens its technological capabilities, maintains regulatory authority, and upgrades its value chain, then interdependence can intensify strategic autonomy. However, if Indonesia remains commodity-dependent and technologically reliant, asymmetric interdependence can occur, most likely deepening structural vulnerability. In short, the agreement itself does not determine sovereignty outcomes. It all depends on domestic governance and its industrial strategy, which can manage its effects.
