Jakarta

The tensions between China and the United States, which have seen the two superpowers at loggerheads in recent years, have eased following a meeting between leaders Xi Jinping and Donald Trump in Beijing on May 14-15. The long-awaited summit provided a temporary pause in the rivalry, injecting a measure of stability into a world currently haunted by wars, trade disputes and a looming global economic crisis triggered by rising oil prices. At the very least, the two leaders were talking rather than fighting.

However, whatever agreements they struck, and neither side has revealed much, it is clear they failed to produce solutions to end the conflicts in the Middle East and Ukraine, leaving the global economy stuck in the doldrums. And while they appear to have de-escalated their bilateral trade dispute, the world must wait to see how this truce will ripple across other economies.

Crucially, there was no resolution to the conflict the US is waging against Iran. Trump had hoped Xi would side with Washington to curtail Iran’s nuclear weapons program, only to be told that the issue must be resolved through negotiation rather than force. Furthermore, Xi flatly rejected Trump’s request to help secure the Strait of Hormuz, a vital maritime chokepoint controlled by Iran through which much of China’s oil passes.

This impasse is bad news for President Prabowo Subianto, whose economic policies hinge on the assumption that the conflict with Iran will soon end. Unlike many of Indonesia’s Asian neighbors, Prabowo has resisted raising domestic gasoline prices and has largely maintained robust government spending. This includes funding for his popular signature policy, the free nutritious meal program for schoolchildren.

To maintain these policies, Prabowo has allowed government deficit spending to climb close to the legally mandated 3 percent cap. However, his optimism is not shared by the markets, international investors or an increasingly anxious Indonesian public. The rupiah has plunged to historic lows and continues to slide, while the local stock market has nosedived, particularly following downgrades by global rating agencies, including MSCI.

Indonesia has been banking heavily on a swift conclusion to the Iran conflict, regardless of who emerges victorious. A prolonged war will severely damage the domestic economy and eventually force Prabowo to implement drastic, unpopular fiscal measures. Even without a hike in fuel prices, the costs of food and other basic commodities are already climbing. Indonesia, which relies heavily on imports for its fuel needs, has been scrambling to secure alternative energy supplies to replace those typically shipped through the Strait of Hormuz.

Another reason Indonesia and the wider Southeast Asian region should view the Xi-Trump summit with concern is that the two leaders completely bypassed the primary security issue affecting the region: the growing tension in the South China Sea. This waterway is equally vital to international trade, yet China maintains overlapping territorial claims there with several ASEAN member states.

Recent months have seen frequent skirmishes between the navies of China and the Philippines, the latter of which holds a formal defense alliance with the US. Neighboring nations are warily watching these developments to see how Washington will respond beyond its standard invocation of "freedom of navigation" principles. China continues to claim nearly the entire South China Sea, an area that encroaches upon Indonesia’s exclusive economic zone in the Natuna waters.

While the US maintains a powerful presence in Asia through its network of allies, the extent to which it would intervene in a direct regional conflict remains an open question.

The Beijing summit did address the issue of Taiwan, with Xi testing Washington’s traditional policy of “strategic ambiguity.” During the meeting, the Chinese leader reportedly warned that mishandling Taiwan could drag the two superpowers into direct conflict. Meanwhile, Trump faces intense domestic pressure at home to approve a US$14 billion arms sale to Taipei.

Against the backdrop of this intensifying geopolitical rivalry, it remains unclear where non-aligned Indonesia stands. In the initial months following his October 2024 inauguration, Prabowo appeared to lean toward Beijing, choosing China as his very first overseas destination as president and signing several bilateral deals.

However, this trajectory shifted after Trump unleashed a wave of tariff wars against much of the world, including Indonesia, in April 2025. In response, Prabowo began warming up to Washington. He personally intervened in bilateral trade negotiations to offer concessions and joined Trump’s newly established Board of Peace, aimed at addressing the Gaza war and subsequent reconstruction. Prabowo even went so far as to offer Indonesian troops to serve under US command to supervise peace efforts in Gaza.

Yet, despite meeting Trump multiple times during the creation of the Board of Peace, Prabowo has still not made an official state visit to the White House, a subtle indicator that bilateral ties may not be as warm as they appear superficially.

Underscoring this diplomatic balancing act, unconfirmed reports suggest that Prabowo is already planning a return visit to China this coming June.