US President Donald Trump recently struck a new tariff agreement with Indonesia. He announced a reduction of tariffs on goods entering the US from Indonesia to 19%. In exchange, American companies will gain what Trump calls “full access” to the Indonesian market.
Details about the deal from Indonesia are still unclear. However, President Prabowo Subianto mentioned it could lead to a “new era of mutual benefit” in US-Indonesian relations. This agreement comes after a series of tariff discussions sparked by Trump’s earlier threats of high tariffs on multiple countries.
Just weeks ago, Trump renewed warnings to many nations, including major trade partners like the EU, Canada, and Japan, that he may impose hefty tariffs starting August 1. Indonesia was also on the receiving end of these warnings, with plans for a 32% tariff that surprised its officials who believed negotiations were progressing well.
After a phone call with President Prabowo, Trump modified that rate. Under the current agreement, Indonesia has promised to lower its tariffs on certain US products, which the US has criticized as being unnecessarily high. Trump emphasized that while Indonesia would pay 19% tariffs, the US would pay none, enhancing American access to Indonesian markets.
Additionally, Indonesia agreed to purchase $15 billion in US energy, $4.5 billion in agricultural products, and 50 Boeing jets. Interestingly, these figures are lower than what was initially expected based on earlier reports.
President Prabowo shared his satisfaction through social media, stating that they concluded a mutual agreement. More information may emerge during his planned news conference after returning to Indonesia.
Indonesia is among the top 25 US trade partners, exporting around $28 billion worth of goods like clothing and palm oil last year. According to Stephen Marks, an economics professor, the political implications of this deal might be more significant for Indonesia than the economic ones. While the US imports various products from Indonesia, its overall trade volume isn’t as high as with some other Asian countries.
The Trump administration has also made moves towards agreements with the UK, China, and Vietnam, although these deals have kept high tariffs intact with many specifics still unresolved. Former economic adviser Everett Eissenstat predicts further agreements might be coming, suggesting that countries are starting to lower their expectations for negotiations.
A recent shift in global trade dynamics suggests many governments prefer to negotiate rather than walk away from talks. For example, Canadian Prime Minister Mark Carney hinted at a readiness to accept tariffs that once seemed unacceptable. Eissenstat noted that being at the negotiation table is preferable to not engaging at all.
As global trade changes, agreements like the one between the US and Indonesia highlight the ongoing evolution of international relations and the complexities of economic policy. For further details on trade policies, you can refer to the U.S. Trade Representative’s report.
