- The US has implemented a new 10% tariff under Section 122 after the Supreme Court deemed previous tariffs illegal. This complex situation could push long-term yields higher while also giving the Fed a little more room to cut interest rates due to reduced inflationary pressure.
- This tariff shift is set to boost exports for countries like China and Vietnam, which could indirectly benefit Indonesia through increased demand from a growing Chinese economy. However, Indonesia faces a direct negative impact as it may lose its comparative export advantage to the US.
- Despite a minor positive market reaction, Indonesia's short-term current account deficit outlook may widen, driven by strong government spending and loan growth. Therefore, the central bank is expected to hold the BI Rate steady, with little chance of a rate cut in the first half of 2026.
