The Jakarta Composite Index (IHSG) closed 1.4% lower on Monday, ending the day at 6,648.14, as investors reacted to the latest tariff policy announcement from US President Donald Trump. The LQ45 index, which tracks the performance of the top 45 stocks on the Indonesian Stock Exchange, also declined by 1.48% to 773.26.
Trump announced a comprehensive 25% tariff on all steel and aluminum imports, effective immediately. He also stated that additional tariffs would be announced on Tuesday or Wednesday. The new tariff measures have raised concerns about inflation, which could limit potential interest rate cuts.
Pilarmas Investindo Sekuritas noted that the US tariff policy is expected to continue, impacting emerging markets such as Indonesia. The country's economy could be negatively affected by higher interest rates and the need for more aggressive interest rate cuts.
The market is now awaiting the Bank Indonesia's (BI) next monetary policy move to address the potential impact of the trade war on inflation. Rising inflation could make it difficult for the US Federal Reserve (Fed) to lower interest rates, which could also impact interest rates in emerging markets. This could lead to a strengthening of the US dollar and capital outflows from emerging markets.
Asian stock markets showed mixed movements, with investors struggling to find direction amid growing concerns about a potential global trade war. The Nikkei index rose 0.04% to 38,801.17, the Shanghai index gained 0.56% to 3,322.17, while the Kuala Lumpur index fell 0.96% to 1,589.95 and the Straits Times index increased by 0.36% to 3,875.13.