Trump’s Reversal of EV Incentives Raises Concerns Over Indonesia’s Nickel Sector and China’s Influence
U.S. President Donald Trump's decision to revoke electric vehicle (EV) incentives has sparked concerns about its potential impact on Indonesia's nickel industry and the growing dominance of Chinese firms in the Southeast Asian nation's EV supply chain. Trump targeted EVs immediately after taking office on January 20, overturning a 2021 executive order by former President Joe Biden that aimed for half of all new U.S. vehicles sold by 2030 to be electric.
Biden's policy, while non-binding, encouraged both domestic and international automakers to invest in EV technologies, creating ripple effects across Southeast Asia, including Indonesia’s nickel sector. Indonesia, home to the world’s largest nickel reserves, had hoped for more diverse investment under Biden's administration. However, analysts suggest that Trump's reversal could shift the global outlook for this strategic metal.
Indonesia banned unprocessed nickel ore exports in 2020 to strengthen its EV battery supply chain, attracting billions in investments, primarily from China. The U.S. has largely refrained from investing in Indonesia’s nickel sector due to environmental concerns, such as deforestation and water pollution.
Josua Pardede, chief economist at Indonesia’s Permata Bank, noted that U.S. investments in the sector have been limited, including a $4.5 billion joint venture between Ford, Vale Indonesia, and China’s Zhejiang Huayou Cobalt to build an EV battery materials plant. Broader U.S. engagement, however, is hindered by Indonesia’s strict export policies and the absence of a free-trade agreement between the two nations.
Indonesia’s efforts to boost critical mineral exports to the U.S. have stalled under Biden and are unlikely to progress under Trump, analysts say. Bhima Yudhistira, executive director at Jakarta-based think tank Centre of Economic and Law Studies (Celios), warned that Trump's rollback on EV incentives could disrupt demand for Indonesian nickel and weaken the country's motivation to meet environmental standards required under the U.S. Inflation Reduction Act.
Concerns also extend to the potential sidelining or cancellation of the Just Energy Transition Partnership (JETP), a U.S.-led initiative aimed at helping Indonesia achieve net-zero emissions in its power sector by 2050.
Indonesia's reliance on China is significant, with over 80% of its nickel production linked to Chinese firms, which have invested $30 billion in Indonesian nickel projects. However, with China facing potential U.S. tariffs on EVs and commodities, Chinese demand for Indonesian nickel could also decline.
To address its nickel supply glut and global economic headwinds, Indonesia’s mining ministry plans to reduce its nickel ore mining quota from 240 million to 200 million metric tons this year. Analysts suggest the country could improve its nickel standards to align with London Metal Exchange requirements for low-carbon metal price quotations, potentially increasing the premium for Indonesian nickel.
