Indonesia signed a sweeping trade deal with the United States on Feb. 20, 2026. The U.S. Supreme Court invalidated the legal foundation for that deal less than 24 hours later.
That’s not bureaucratic timing. That’s a diplomatic earthquake.
President Prabowo Subianto’s government now faces a reality few trade negotiators have confronted: substantial concessions made in exchange for tariff relief that may no longer have legal standing. The Indonesian president’s response has been measured, perhaps necessarily so. His government is taking a wait-and-see approach while Washington’s domestic political machinery determines whether Congress will codify what the executive branch attempted to impose unilaterally.
The strategic calculus for Jakarta: and every Southeast Asian capital watching closely: just became exponentially more complex.
The Deal That Disappeared
The Agreement on Reciprocal Trade set a 19% import tariff on most Indonesian products entering the United States. That figure matters because the Trump administration had threatened a 32% rate. Indonesia negotiated down by 13 percentage points through concessions that would reshape its trade posture.
Those concessions weren’t minor adjustments. Indonesia agreed to eliminate tariff barriers on more than 99% of U.S. products. The country committed to addressing non-tariff barriers across agricultural, digital and manufacturing sectors. For an economy that has historically maintained protective measures for domestic industries, particularly in agriculture and automotive manufacturing, this represented a fundamental shift.
The agreement included specific provisions targeting Indonesia’s nickel export policies: a particularly sensitive issue given the country’s dominant position in global nickel production and its efforts to build downstream processing capacity. Indonesia controls approximately 40% of global nickel reserves and has aggressively pursued resource nationalism policies to force processing onshore rather than exporting raw ore.
Then the Supreme Court ruled that presidential tariff authority exceeded constitutional bounds without explicit congressional delegation. The Constitution grants Congress exclusive authority to issue tariffs. The ruling didn’t just affect Indonesia’s bilateral agreement. It called into question every bilateral trade deal signed since April 2025 under the same executive authority framework.
Prabowo’s Measured Response
President Prabowo has signaled that Indonesia will refrain from decisive follow-up actions while monitoring U.S. domestic politics. That’s diplomatic language for: “We’re not renegotiating until we know what we’re negotiating with.”
The position reflects Indonesia’s limited leverage in the current environment. The country made commitments. Whether those commitments remain binding if the reciprocal tariff relief evaporates remains unclear. Walking back the concessions risks antagonizing Washington, which could prompt congressional action to impose tariffs at or above the originally threatened 32% rate. Maintaining the concessions without reciprocal U.S. market access concedes Indonesia’s negotiating position for nothing.
That’s a needle that’s almost impossible to thread.
Indonesia’s economy has specific vulnerabilities that explain Prabowo’s caution. The country exported $28.7 billion in goods to the United States in 2025, making the U.S. its second-largest export destination after China. Key export categories include textiles and garments, palm oil products, electronics components, and increasingly, processed nickel products and battery-grade materials.
The nickel dimension is particularly significant for mining and metals markets. Indonesia has used export bans on raw nickel ore to force foreign miners and battery manufacturers to build processing facilities domestically. This strategy has attracted billions in foreign investment from Chinese battery makers and Korean electronics manufacturers. A U.S. tariff regime that discriminates against Indonesian nickel products could disrupt this industrialization strategy and potentially redirect investment flows to competing jurisdictions like the Philippines or Australia.
Southeast Asian Exposure
Indonesia isn’t isolated in this uncertainty. Vietnam, Thailand, Malaysia and the Philippines all signed or were negotiating similar bilateral agreements under the same legal framework that the Supreme Court invalidated.
Vietnam’s situation is particularly acute. The country signed a deal setting tariffs at 46%: down from a threatened 84%. Vietnam’s export exposure to the U.S. market is substantially higher than Indonesia’s, with the United States accounting for approximately 29% of Vietnam’s total exports in 2025. The country’s electronics assembly, textile and footwear industries are deeply integrated into U.S. supply chains.
Thailand negotiated tariffs down to 36% from a threatened 52%. Malaysia secured 24% versus a threatened 37%. Each country made specific concessions tailored to U.S. demands: Vietnam committed to intellectual property enforcement mechanisms and digital trade provisions; Thailand agreed to agricultural market access and pharmaceutical patent protections; Malaysia committed to government procurement transparency and state-owned enterprise reforms.
All of these agreements now exist in legal limbo.
The regional implications extend beyond bilateral trade flows. Southeast Asian economies have spent the past five years reconfiguring supply chains in response to U.S.-China trade tensions. Manufacturers moved production from China to Vietnam, Thailand and Indonesia specifically to avoid U.S. tariffs on Chinese goods. If the U.S. now imposes substantial tariffs on Southeast Asian exports, that entire reshoring strategy collapses.
For commodities and mining specifically, the uncertainty creates planning paralysis. Indonesia’s downstream nickel processing strategy depends on assured market access for battery-grade nickel products. Malaysian rare earth refining projects require confidence in U.S. and European demand stability. Vietnamese graphite processing investments need visibility into trade policy frameworks.
None of that visibility currently exists.
What Happens Next
Congress now controls whether the tariff threats and bilateral agreements become legally enforceable. That legislative process is inherently unpredictable and subject to domestic political dynamics that have little to do with Southeast Asian trade flows.
Three scenarios are plausible:
Congressional codification: Congress passes legislation granting the executive branch explicit tariff authority or directly legislating the bilateral agreements already signed. This would restore the status quo ante and allow the negotiated deals to proceed. The challenge: Congressional action requires bipartisan support for trade legislation that many Democrats oppose on labor and environmental grounds and some Republicans oppose as executive overreach.
Renegotiation: The administration returns to negotiating table with congressional constraints that may demand additional concessions from trading partners. Southeast Asian countries would face pressure to maintain the concessions they already made while potentially accepting higher tariffs or additional requirements that emerge from the legislative process.
Reversion to WTO rates: The bilateral agreements collapse entirely, and trade reverts to World Trade Organization most-favored-nation rates. For most Indonesian, Vietnamese and Thai exports, this would mean substantially lower tariffs than either the threatened rates or the negotiated bilateral rates. But it would also mean the concessions these countries made: market access commitments, regulatory changes, intellectual property reforms: were extracted without reciprocal benefit.
Indonesia’s government is clearly hoping for scenario one while preparing for scenario two and quietly preferring scenario three to scenario two.
The mining and commodities dimension adds a wrinkle. U.S. demand for critical minerals from Southeast Asia: nickel, rare earths, graphite, copper: is driven by supply chain security concerns independent of trade policy. The U.S. needs these materials for domestic battery production, defense applications and clean energy infrastructure regardless of tariff structures.
That creates asymmetric leverage. Indonesia can absorb U.S. tariffs on textiles and palm oil more easily than the U.S. can replace Indonesian nickel supply on short notice. But that leverage only applies if Jakarta is willing to use it: and weaponizing critical mineral exports would trigger exactly the kind of resource nationalism backlash that has prompted U.S. efforts to diversify away from Chinese supply chains.
Prabowo’s government understands this dynamic. Indonesia has pursued nickel processing industrialization precisely to create strategic value beyond raw commodity exports. Threatening to withhold that supply undercuts the long-term relationship Indonesia is trying to build with U.S. battery manufacturers and automakers.
The Broader Picture
This isn’t just about tariffs and trade flows. It’s about the stability of international economic governance at a moment when commodity supply chains are being fundamentally reconfigured.
Mining companies making multi-billion dollar investment decisions in Indonesian nickel processing, Philippine copper expansion, or Malaysian rare earth refining need regulatory and trade policy stability. Project economics that pencil out at 19% U.S. tariffs collapse at 32% tariffs. Financing commitments that assumed assured market access become untenable if that access is uncertain.
The Supreme Court ruling doesn’t just affect deals already signed. It creates uncertainty about future agreements, ongoing negotiations and the broader framework for U.S. trade policy. Companies cannot build decade-long mining and processing projects on foundations that might shift with congressional elections or judicial decisions.
Southeast Asian governments, meanwhile, confront a choice between maintaining the market-opening concessions they already made or attempting to walk them back and risk U.S. retaliation through congressional tariff legislation. Either option carries substantial economic and political costs.
For Indonesia specifically, the timing is particularly problematic. Prabowo took office in October 2024 with an ambitious economic agenda that includes attracting $150 billion in foreign investment over five years. Trade policy uncertainty undermines that objective. Foreign investors considering Indonesian mining and processing projects need to understand the tariff environment in destination markets before committing capital.
They don’t have that understanding right now.
The measured response from Jakarta reflects this reality. Prabowo cannot appear to capitulate to U.S. pressure, particularly after making substantial concessions that may deliver no benefit. But he also cannot afford a trade war with Indonesia’s second-largest export market while trying to attract the foreign investment his economic program requires.
That’s the position every Southeast Asian leader currently occupies: stuck between concessions already made and uncertainty about whether those concessions bought anything at all.
The coming months will determine whether this Supreme Court ruling becomes a temporary disruption or a fundamental reset of U.S.-Southeast Asian trade relations. For now, Indonesia and its neighbors are watching, waiting and preparing for multiple scenarios simultaneously.
Welcome to trade policy in 2026. Certainty is no longer part of the package.
