In a move hailed as a significant shift in economic relations, Indonesia has reached a trade agreement with the United States that reduces tariffs on Indonesian exports. The new tariff rate of 19 per cent marks a welcome decrease from the previous 32 per cent, promising potential benefits for Jakarta’s economy.
Key Aspects of the Trade Deal
- The agreement allows Indonesia to export critical goods, including palm oil, cocoa, and nickel, under more favourable conditions.
- Indonesia is the world’s largest producer of palm oil, accounting for 85 per cent of the U.S. imports in 2024.
- U.S. technology products will be exempted from Indonesia’s local content rule, facilitating smoother trade.
Reactions from Indonesian Leadership
Indonesian leader Prabowo Subianto expressed optimism following discussions with U.S. President Donald Trump. He referred to the agreement as a “new era of mutual benefit” and noted the substantial purchase commitments Jakarta agreed to make, including 50 Boeing jets and US$15 billion in U.S. energy.
Implications for Trade and Economy
The deal, which mirrors frameworks with other nations like Vietnam, opens a wide array of economic opportunities. It aligns with Indonesia’s goals as a member of the G20, as the country continues to strengthen its position in international trade.
However, some economists have raised concerns. Yose Rizal Damuri from the Centre for Strategic and International Studies cautioned that the deal could disproportionately benefit the U.S. over Indonesian businesses.
Looking Ahead
With a significant trade surplus of US$17.9 billion with the United States in 2024, the agreement may bolster Indonesia’s export capabilities. It remains to be seen how quickly the new tariff rate will be implemented and what further negotiations might yield.