The United States has fundamentally repurposed its trade policy to prioritize national security over market efficiency, centering its strategy on securing critical mineral supply chains. This shift, highlighted in recent research, reveals that the U.S. now utilizes “preferential minerals trading zones” and sector-specific arrangements to decouple from adversaries—specifically China—while incentivizing “friend-shoring” (Jack, 2026). In early 2026, this strategy culminated in the Agreement on Reciprocal Tariff (ART) between the Trump and Prabowo administrations, which integrates critical minerals into a broader framework of “reciprocal” trade obligations that often operate outside traditional World Trade Organization rules (Jack, 2026).
The relationship between the ART and critical minerals is defined by a shift from non-binding cooperation to enforceable, reciprocal commitments. Under this agreement, the U.S. has pressured Indonesia to remove longstanding barriers to the export of raw ores, such as nickel and bauxite, in exchange for reduced tariffs on Indonesian goods entering the American market (PWYP, 2026). Furthermore, the U.S. is implementing price floor mechanisms within this trade zone to protect partner countries from Chinese price-undercutting, effectively creating a “price-stable” bloc intended to unlock private investment in mining and processing (Jack, 2026). However, this reciprocity is often one-sided, demanding that Indonesia eliminate 99% of its trade barriers while facing a strict 19% reciprocal tariff on items not explicitly “identified” for zero-rate status (PWYP, 2026).
Indonesia’s downstreaming strategy (hilirisasi) faces significant disruption from these U.S. policy demands. While Jakarta seeks to ban raw mineral exports to force domestic industrialization, new trade frameworks encourage Indonesia to facilitate U.S. investment across the entire value chain—from extraction to refining (CSIS, 2026). Critics argue this “sovereignty for market access” trade-off risks turning Indonesia back into a mere supplier of raw materials for U.S. defense and EV sectors, potentially undermining local content requirements (TKDN) and environmental sovereignty (PWYP, 2026). Indonesia’s challenge is to ensure that “secondary processing” remains local, inviting firms like Freeport-McMoRan to build domestic smelters rather than exporting unprocessed wealth (CSIS, 2026).
Ultimately, the U.S. policy forces Indonesia into a precarious balancing act between its primary mineral investor, China, and its strategic partner, the U.S. (Jack, 2026). By locking Indonesia into a “bloc-based” supply chain, the ART may lead to further fragmentation of global trade rules (Jack, 2026). For Indonesia to succeed, it must navigate the “19 against everything” tariff structure while ensuring its coal-powered smelting operations transition to the green benchmarks required to qualify for U.S. subsidies under the Inflation Reduction Act (PWYP, 2026).
Disclaimer: This AI-generated article is based on the cited references for discussion purposes. For further insights, please refer to the primary sources provided.
Sources:
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Jack, D.S. (2026). The International trade dimensions of the United States critical minerals security strategy. WIDER Working Paper 2026/35. UNU-WIDER. https://www.wider.unu.edu/publication/international-trade-dimensions-united-states-critical-minerals-security-strategy
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PWYP Indonesia (2026). Critical Mineral Sovereignty and the Indonesia–United States Reciprocal Trade Agreement: Opportunity or a New Threat of Extractivism? https://pwypindonesia.org/en/critical-mineral-sovereignty-and-the-indonesia-united-states-reciprocal-trade-agreement-opportunity-or-a-new-threat-of-extractivism/
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CSIS (2026). Critical Minerals Ministerial Introduces New International Cooperation Strategy. https://www.csis.org/analysis/critical-minerals-ministerial-introduces-new-international-cooperation-strategy
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U.S. Chamber of Commerce (2025). Strengthening America’s Security through Critical Mineral Partnerships. https://www.uschamber.com/assets/documents/Strategic-Ground_Strengthening-Americas-Security-Prosperity-and-Leadership-through-US-Africa-Critical-Mineral-Partnerships.pdf
