U.S. tariffs, interest rates, foreign direct investment, and manufacturing resilience in Indonesia: Evidence from 2016–2024

Martino Wibowo; Faizul Mubarok; Vesarach Aumeebonsuke

doi:10.61255/jeemba.v4i5.1949

Authors

Martino Wibowo Universitas Terbuka, Tangerang Selatan, Indonesia
Faizul Mubarok Universitas Terbuka, Indonesia
Vesarach Aumeebonsuke International Cooperation, National Institute of Development Administration, Bangkok, Thailand

DOI:

https://doi.org/10.61255/jeemba.v4i5.1949

Keywords:

U.S. tariffs, FDI, manufacturing resilience, Federal Reserve, domestic interest rate

Abstract

Purpose – This study examines how U.S. tariff shocks, foreign direct investment (FDI), Federal Reserve interest-rate conditions, and domestic interest rates are associated with Indonesia’s manufacturing resilience. It also reassesses the mediating role of FDI and the moderating role of domestic interest rates.

Design/methodology/approach – A quantitative explanatory design was applied to a secondary-data matrix covering 2016–2024 and containing 64 aligned observations. PLS-SEM was estimated in SmartPLS with 5,000 bootstrap resamples. Measurement quality was reassessed from the reported outer loadings; composite reliability and average variance extracted were calculated from those loadings.

Finding/Results – U.S. tariffs were positively associated with FDI (β = 0.534, p < 0.001) and manufacturing resilience (β = 0.267, p = 0.034). The FDI-mediated path was not significant (β = 0.096, p = 0.355). The Federal Reserve-rate path was positive (β = 0.659, p = 0.002), while the domestic-rate direct path was negative (β = -0.382, p = 0.048). The supplied bootstrap diagram reports a significant FDI × domestic-rate interaction (p = 0.025), although its coefficient is rounded to 0.000 in the algorithm output, indicating a statistically detectable but substantively very small interaction under the reported scaling.

Originality/Value – The study integrates trade-policy reallocation, global monetary conditions, FDI, and manufacturing resilience in one Indonesian framework. It distinguishes the attraction of foreign capital from the domestic capability required to convert that capital into resilient industrial performance.

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