Globalization connects economies worldwide through interconnected networks that turn international borders into easy pathways that enable free flow of goods, capital and ideas effortlessly.  The previously admired and highly praised global supply chain characterized by great efficiency and economies of scale has now become a doubled-edged sword. It provides extensive vast market prospects and growth opportunities but yet exposes domestic economies to external shocks. This conflict is perhaps most apparent in relation to Indonesia’s strategic act to balance between its global engagements and economic sovereignty.

This interdependence, while lucrative during stable times, reveals its fragility during crises. The US subprime mortgage crisis of 2008 and Greek debt crisis are good examples that serve as cautionary tales, which portray the fact that economic contagion tends to spread at a very fast pace across the highly connected financial structure. Just recently, protectionist sentiments were rekindled around the world with US President Donald Trump’s aggressive tariff regime. In order to revive American industry, Trump imposed steep tariffs on foreign imports. But the collateral damage felt on nations like Indonesia where the exports became less competitive and economic growth projections were forced into recalibration.

Indonesia, fortunately, has not been without armor. When much of world sank into recession during the 2008 global financial crisis, the country demonstrated very strong resilience due to robust domestic consumption and a resilient microeconomic base. One basis of this foundation strength stems from the often ignored, but most important sphere of micro, small and medium enterprises (MSMEs). In 2025, Indonesia has approximately 65 million MSMEs, making up more than 60 percent of the national GDP and also employing over 120 million workers. Together, they generate over IDR 9,000 trillion annually, forming the backbone of a people-based economy.

This people-based economy is more than a fallback mechanism—it is a strategic bulwark. In contrast to multinational corporations that might relocate or leave with changing winds of trade, MSMEs are synonymous with local ecosystems. Their strength  entertwined with their agility, community integration and the ability of generating inclusive growth. The advent and rise of digital platforms has only increased their relevance and also made them even more popular. Using e-commerce solutions, small vendors residing in remote regions are able to connect and sell their products to urban customers effortlessly. The proliferation as well as the expansion of mobile payment systems along with standardized systems such as QRIS (Quick Response Code Indonesian Standard) has greatly enhanced the speed of this transformation. In Q1 2025, over 30 million merchants, mainly MSMEs, used QRIS to facilitate financial transactions that are worth more than IDR 262 trillion.

By making sure that money circulates domestically, QRIS and other digital tools aid in reducing capital leakage as well as helping the local economies to retain their purchasing power. They provide an antidote to the outflow of wealth that accompanies reliance on foreign dominated platforms and instruments. This form of financial localization bears great resemblance to a quiet revolution, reclaiming control of the national economy in an era of multinationals dominating consumer habits.

The advantages that this economic model offers surpass basic stability achievements. A people-based economy centered on MSMEs and domestic consumption helps to shield Indonesia from the whims of global political uncertainties. When Trump introduced tariffs on global supply chains, it caused significant problems which export-dependent national economies had to endure. Indonesia’s diversified economy, demonstrated strength through its diversified markets which depend substantially on domestic consumer requirements. Trump's policy actions have been temporarily suspended for now, but they left behind geopolitical disintegration along with new global trade regulations that emerged in their wake.

This modern era requires fresh innovative ways of thinking. Indonesia must transform from the role of passive participation in the global economy to that of a very proactive domestic empowerment.  Investments made in rural entrepreneurship development together with vocational training opportunities and digital network establishment and logistical decentralization represent more than just social welfare but are also very fundamental economic necessities. Supporting MSMEs demands concrete actions that go beyond rhetoric which should include tax code simplification and credit ease as well as local procurement commitment in government spending and digital education for export readiness and quality standards implementation.

Moreover, there is a cultural dimension to this strategy. For far too long, consumer buying behavior has pivoted excessively toward imported commodities, often driven because of consumers' tendency to perceive foreign goods as far superior and with very high quality and prestige than the local products. National campaigns aimed at the promotion of local goods and services, alongside both regulatory incentives and digital exposure can play a very big role altering these preferences. In essence, economic sovereignty begins in the minds of consumers. The slogan “Bangga Buatan Indonesia” (Proudly Made in Indonesia) needs to move past its current marketing tagline and transform into a shared collective community mindset.

The people-based economy also tackle the dual economic challenge of equity together with growth. While top-heavy development models work towards concentrating wealth at the elite’s disposal, MSMEs encourage bottom-up impact and grassroot participation. They help to narrow down the gap between the urban and the rural areas and avail opportunities for traditionally marginalized groups such as women entrepreneurs, youth, and indigenous communities. This bottom-up process does not only distribute income but it also creates a fountain of creativity because local producers are in touch with the needs of the consumers.

Nonetheless, there is no economic model that can exist without facing specific difficulties or challenges. MSMEs encounter multiple challenges to grow ranging from scaling difficulties, branding issues to compliance regulations as well as their inability to compete against large industrial companies. In addition, digital divides continue to exist outside Java. Also, policy processes and data collection are hindered by the informal operations of MSMEs.  Nevertheless, these are not insurmountable obstacles; still they do need specific, targeted and sustained interventions that are context-specific.

Contrast this with Indonesia’s external economic prospects. As global growth slows partly due to residual trade tensions and the realignment of supply chains, Indonesia’s export markets face headwinds. The IMF and World Bank at the beginning of 2025 project Indonesia’s GDP growth at around 5.2–5.5% annually in the near term, contingent on strong domestic fundamentals which has been downgraded to 4.7% as result of Trump's era tariffs. Should global demand falter, this range could narrow. However, a fortified domestic economy with enhanced MSME sector and consumer demand can serve as a perfect antidote to such forces.

This is not an appeal to autarky. Indonesia must be engaged globally but on its own terms Through emphasis of local enterprise and the use of domestic capabilities, Indonesia can enter the world not from a position of dependency, but rather from a position of strength. Globalization itself is not a threat; however, when domestic foundations are disregarded, globalization will become a threat.

In conclusion, Trump-style tariffs can be considered to have exposed the vulnerability of global supply channels and the risks of being over-dependent on external markets. For Indonesia, this time is simultaneously a threat and an opportunity. A people-based economy that is resilient, inclusive, and digital is not merely an insurance policy against respective external shocks but however, it is a long term strategy for national resilience, sustainable growth and economic dignity.