Trade wars, particularly through increased import tariffs and international trade tensions, is capable of drive inflation in Indonesia. The Trade Tension Index, which reflects the level of trade tensions between major countries, is a key indicator that influences the price of goods. According to (Rose, 2020) slower growth is the most obvious and direct macroeconomic effect of trade disputes. US protectionism and the resulting trade policy uncertainty have contributed significantly to the global downturn. The International Monetary Fund (IMF) lowered its forecast for GDP growth in October 2019 by 0.4% over the previous six months, raising the possibility of a recession or macroeconomic downturn. Meanwhile, higher import tariffs will directly increase the cost of imported goods, which in turn will increase the price of domestic goods. According to (Fajgelbaum & Khandelwal, 2022) Tariff policies can increase inflation through several mechanisms. Initially, tariffs affect importers or retailers more, especially for goods that could not be anticipated or stockpiled before the tariff was announced. For retail goods such as household goods and electronics, tariffs are often passed on to retailers, so consumer prices are not immediately affected. However, when stocks of goods that had been stockpiled before the tariff run out, retailers begin to raise prices to offset the additional costs of the tariff. Ultimately, the burden of the tariff is passed on to final consumers, so that prices of goods rise and contribute to inflation.

(Kacaribu et al., 2019) explained that after the trade war, inflation in Indonesia faced various external pressures but still tended to be stable. However, the risk of inflation remains, especially from the possibility of increasing fuel prices if subsidies cannot be maintained in the long term. The increase in fuel prices will have a direct impact on transportation and distribution costs, which in turn can push up the prices of necessities. In addition, the significant depreciation of the Rupiah throughout 2018, reaching more than 12% against the US Dollar, has increased the price of imported goods, which has the potential to increase inflationary pressures in certain sectors such as pharmaceuticals and electronics that are highly dependent on raw material imports. In this case, Indonesia responded with a prudent monetary policy, such as adjusting the benchmark interest rate by Bank Indonesia to control inflation. (Indonesia, 2020) the government will continue to optimize three monetary policy tools—interest rate policy, rupiah exchange rate stabilization, and bolstering foreign exchange reserves—in an effort to lessen the impact of the global turmoil on the monetary policy trilemma. By working closely with the government to limit inflationary pressures on price groups that are subject to government regulation and volatile food categories, interest rate policy aims to lower core inflation and bring it back to the original target.

Besides that, Ministry of Trade of the Republic of Indonesia ( 2023) formulated strate gic steps to maintain macroeconomic stability and encourage national economic growth. Fir st, improve policy coordination. Second, maintain Volatile Food (VF) Component inflation be low the range of 3.0%-5.0%, especially on National Religious Holidays (HBKN). Third, impr ove regional cooperation and accelerate the implementation of the food barn program to imp rove domestic food security. Fourth, provide more easily accessible food data to help formula te inflation control policies. And fifth, improve communication synergy to help manage inflat ion expectations in the community. The results of this study are in line with (Charbonneau, 2019) trade wars represented through tariffs affect Canadian inflation. Global supply chain s have a significant impact on domestic prices for small open economies. Policy changes that affect prices in one sector, such as the imposition of tariffs, will indirectly affect all sectors o f the economy through wages and material inputs.

Trade wars have the potential to reduce demand for Indonesian exports, especially du e to increased import tariffs and global market uncertainty. A high trade tension index refle cts international market uncertainty that could reduce demand for Indonesian products. Ac cording to (Rose, 2020) there are many more subtle and indirect consequences of trade tensi ons, some of which are long-lasting. The most obvious consequence of weakened trade is tha t reduced trade integration has a negative impact on welfare, productivity, and income. In a ddition, it is clear that trade wars weaken trade, especially for countries like Indonesia. On the other hand, higher import tariffs imposed by large countries, such as the United States and China, will limit market access for Indonesian products previously exported to these co untries.

Since the trade war, Indonesia's exports have experienced a significant decline, accord ing to (Maghfiroh, 2021) Indonesia's export value in 2018 was recorded at USD 180,012.67 b ut decreased to USD 167,496.99 million in 2019. This decrease reflects the impact of global trade tensions that have affected demand and prices for Indonesia's main commodities in th e international market. These results are in accordance with research by (Sulistiyowati & Pratama, 2023) where the decline in global demand and increasing competition between count ries caused a slowdown in Indonesia's export growth to only 6% in the third quarter of 2019 In addition, exports of key commodities such as palm oil fell by 17%, while exports of paper and cardboard to China fell by 45.69%. Indonesia's total export value also fell 28.9% in May 2020 compared to the previous year.

On the other hand, (Laksmana, 2024) added that the economic slowdown in China als o raised concerns about the decline in demand for coal exports, which is one of Indonesia's l argest exports to China. According to data from the Ministry of Energy and Mineral Resour ces of the Republic of Indonesia, until August 2018 coal exports to China reached 44.5 millio n tons or 31% of Indonesia's total coal exports, making the Chinese market the main deter minant of the reference coal price. According to (Maria, 2022) after the trade war, the perfor mance of export commodities, especially coal, experienced a significant decline of -5.78% in 2019. An equally important impact is that the excess supply of goods from China due to red uced US demand can flood the Indonesian market, which can create competition with local products. The same thing also applies to US goods that lose their market in China.

According to (Laksmana, 2024) the opportunity to open new markets, such as steel ex ports to the US, can be utilized by Indonesia. The high tariffs imposed by the US on Chines e steel open up opportunities for Indonesia to become an alternative supplier. However, Indo nesia still faces challenges in attracting foreign investment and increasing product competit iveness compared to other ASEAN countries. So in this context, Indonesia needs to increase trade diplomacy to find new export markets and strengthen trade relations with non-traditi onal countries. (Widayat et al., 2024) added that several alternatives that Indonesia can do are by implementing downstream policies on several commodities such as palm oil. Then ca rry out downstreaming of products that are also needed by Europe, especially Nickel. And co nduct diplomacy with countries that produce the world's leading commodities, such as Mala ysia, Thailand, Colombia, and also Ghana in the context of global palm oil producers. In add ition, Indonesia. The industrial sector is also evaluated to increase product competitiveness, with a focus on innovation and reducing dependence on export markets affected by the trade war. The decline in export volume can affect state revenues, reduce the contribution of the t rade sector to GDP, and reduce employment in the export sector. Therefore, diversifying exp ort markets and improving product quality are very important to maintain and increase the contribution of exports to the Indonesian economy.

A trade war that results in the imposition of high tariffs by large countries, such as th e United States, on products from the countries involved will affect Indonesia's import struc ture. According to (Sulistiyowati & Pratama, 2023) the publication of a list of goods whose ta riffs were increased by the US and China is an indication of a trade war between the two. Pr oducts from the aviation, information and communication technology, robotics, and machine ry sectors are included in the 1,300 Chinese imports listed by the Office of the United States Trade Representative (USTR). In response, China imposed a 25% tariff on 106 US goods, gr ouped into 14 categories such as chemicals, automobiles, aircraft, and soybeans. Therefore, the tariff policies of the two countries involved in the trade war will have an impact on Indo nesian imports. Higher import tariffs will cause the cost of importing goods to increase, whi ch in turn leads to cost inflation and affects the competitiveness of domestic products. This c ondition shows that Indonesia imports many goods from countries involved in the trade war, especially industrial raw materials, capital goods, and high-tech products. Increasing impor t tariffs will lead to a decrease in imports, especially goods that cannot be produced domesti cally.

One of the impacts that occurred in Indonesia was on corn commodities. According to CNBC Indonesia (2025) as one of the countries with high corn needs, Indonesia faces the th reat of price volatility that can disrupt the domestic supply chain. Imports will increase in 2 024 to reach 1.5 million tons. This increase shows a high dependence on the global market. The impact of the trade war has worsened this situation, as tensions between the two major countries often trigger disruptions in global commodity trade, including corn. Tariff fluctuat ions and export restriction policies can exacerbate supply and price instability, forcing Indo nesia to face a spike in import costs that could potentially weaken several sectors. In additio n, according to (Maria, 2022) China's import market position in Indonesia for electrical and mechanical commodities has also increased rapidly, and this position has remained after th e trade war. Exporting countries will seek other markets for their goods. One of the ASEAN members with the potential to tap the Chinese market is Indonesia, the nation with the lar gest population in the ASEAN area. The Indonesian government should focus more on this because, as seen by the data on Indonesia's export value in 2018 and 2019, which showed a deficit, Chinese goods would continue to enter the country if proactive measures are not tak en.

To reduce the impact of increasing import tariffs, according to (Wangke, 2020) the gove rnment must implement protection for the people's economic interests to ensure the surviva l of small and medium enterprises in certain sectors. To prevent Indonesia from importing, the government must establish regulations that limit the use of domestic products. Althoug h imported goods may be much cheaper than local goods, Indonesian consumers should pref er domestic goods. Government policies that encourage domestic raw materials and investm ent in the manufacturing sector aim to reduce dependence on imports. Although import sub stitution policies can help reduce dependence on foreign goods, disruptions to the supply cha in can occur, which can increase domestic production costs. Therefore, expanding domestic i ndustrial capacity and strengthening the manufacturing sector must be carried out to mini mize the negative impact of high import tariff policies.

Economic equilibrium is greatly influenced by the exchange rate, a measure of a count ry's monetary strength, and its movements are directly reflected in the foreign exchange ma rket. To regulate the movement of the rupiah, the position of monetary policy instruments i s very important. To maintain economic stability and public expectations for the future, mo netary institutions must continue to intervene in transmissions that affect currency exchan ge rates even when a country adopts a floating exchange rate regime. However, exchange rat e fluctuations cannot be controlled, therefore their impacts need to be addressed (Pratiwik & Prajanti, 2023). Trade tensions caused by trade wars can cause uncertainty in internatio nal financial markets, which in turn affects the rupiah exchange rate. High trade tension in dex and import tariffs imposed by major countries can reduce investor sentiment towards e merging market countries such as Indonesia, causing large capital outflows and depreciatio n of the rupiah exchange rate against the US dollar.

(Indonesia, 2020) reported the US-China trade war caused global financial mark et panic, foreign capital flight, and exchange rate depreciation pressure in developing countr ies, including Indonesia. According to (Salim & Soelistyo, 2024) until October 2023, the Rupi ah exchange rate has fallen 54 points or 0.35 percent from its lowest position against the US D in 2022, around Rp15,731. Global sentiment pressure and capital outflows in the stock an d bond markets which are expected to have a major impact have caused the Rupiah to conti nue to weaken against the US dollar. The weakening of the Rupiah has caused the price of i mported raw materials, so costs have also increased. Depreciation also affects the industrial sector that relies on imported raw materials. (Maghfiroh, 2021) added that if the Rupiah exc hange rate weakens, ideally this can encourage exports to be even greater because of the di fference in prices abroad and domestically. However, Indonesian exports will find it difficult to increase export volume because they are influenced by internal domestic factors, namely the trend of the consumer price index which increases every year and will affect production costs. So this condition is equally detrimental from a trade perspective.

Exchange rate fluctuations caused by trade wars can worsen inflation and increase pe ople's cost of living. (Salim & Soelistyo, 2024) the government must encourage export activiti es to strengthen the currency increase the country's foreign exchange reserves and maintai n domestic price stability. Policies that ensure exchange rate stability are very important to reduce economic uncertainty and maintain the price stability of goods in the domestic mark et. Bank Indonesia is trying to stabilize the rupiah exchange rate by intervening in the forei gn exchange market and maintaining foreign exchange reserves. In addition, the Indonesian government is also trying to attract foreign investment to reduce dependence on volatile int ernational capital flows. According to (Aba, 2021) for investors to remain interested in invest ing in Indonesia and reduce capital outflows, the policy of raising the benchmark interest ra te seeks to make Indonesia's domestic financial assets more attractive. The exchange rate w ill eventually rise against the rupiah if investment flows continue.

Gross Domestic Product (GDP) is the main indicator in measuring economic growth i n a country, but there are no monthly statistics that measure it. According to (Manna et al., 2015) the Industrial Production Index is a statistical indicator that can measure the shortterm growth in industrial production in a country. The growth rate based on the monthly In dustrial Production Index is closely monitored and watched by planners and policymakers a s well as by the business community at large. Furthermore, its growth rate is used in prepa ring provisional estimates of quarterly and annual GDP. In the context of this study, the Tr ade Tension Index and import tariffs can directly affect the industrial production index by a ffecting the production of goods that rely on imported raw materials and export markets. Ac cording to (Pan, 2023) trade friction between China and the United States directly affects pr oduction costs, thus affecting supply; meanwhile, policy changes will also lead to changes in market demand, and changes in the relationship between supply and demand will inevitabl y cause fluctuations in the overall economic environment of the market.

Although the research results show that the trade war as measured using the Trade Tension Index and import tariffs does not affect the Indonesian Industrial Production Index in either the short or long term, this can be explained by Indonesia's more diversified econo mic conditions. According to Bank Indonesia One of the strategies to accelerate Indo nesia's economic transformation is by strengthening priority sectors. Most of Indonesia's in dustrial sectors, such as textiles, food, and beverages, although dependent on raw material i mports, are mostly focused on the domestic market. In other words, many industries in Indo nesia are not very dependent on exports or international markets, so the direct impact of a t rade war or changes in import tariffs is relatively limited. In addition, the Indonesian gover nment continues to strive to reduce dependence on imports through import substitution poli cies and encourage domestic production. These steps, including tax incentives and investme nt in the manufacturing sector, strengthen the resilience of domestic industries to continue growing despite global trade tensions.

The implications of these findings suggest that Indonesia's industrial sector is more r esilient to shocks from external factors, including trade wars. According to (Aba, 2021) inves tment from American companies in Indonesia will increase GDP, create new jobs for Indone sians, expand the country's manufacturing sector, and advance Indonesian technology. Indo nesia should increase the portion of export-based FDI which can reduce the current account deficit. Furthermore, because goods made by foreign companies have certain marketability i n the global market, Indonesia's export volume can increase. Given its abundant natural res ources, Indonesia should be a desirable choice for investors looking to relocate their industri al base from China. Although international trade tensions and import tariffs may affect pro duction costs in some sectors, the Indonesian industry has been able to survive and even ad apt by increasing domestic production capacity and dampening external impacts. This also r eflects the success of government policies in mitigating global impacts and strengthening th e industrial sector through increased competitiveness. Thus, despite global trade tensions, I ndonesia's industrial sector still shows quite good resilience and can maintain stability in t he long term.