US And Indonesia Finalize New Trade Deal With Lower Tariffs

In a move expected to reshape trade dynamics between the two nations, President Donald Trump and Indonesian President Prabowo Subianto announced a major reduction in tariffs on Indonesian imports from 32% down to 19%.

Trump stated that this change was secured in return for “full access” for American firms.

In a post shared via social media, Prabowo described the development as marking a “new era of mutual benefit” with Washington. Speaking to journalists in Jakarta, he added that Trump was “quite a tough negotiator”.

This breakthrough follows a series of intense negotiations prompted by a wave of new tariffs introduced by the U.S. administration earlier this year. Those actions triggered a number of talks with trade allies worldwide.

Although Trump had previously paused some of his earlier tariff strategies, he resumed his aggressive stance this month sending formal notices to numerous countries warning of steep duties starting August 1.

Nations named in those warnings included many of America’s largest economic partners such as Canada, Japan, Mexico, South Korea, and the European Union.

Indonesia, too, received a formal letter last week notifying them of an intended 32% tariff, which reportedly surprised officials who had believed a deal was nearing completion.

On Tuesday, Trump shared that the reduced rate followed a direct phone conversation with President Prabowo.

He added that the deal also included a commitment from Indonesia to ease tariffs on U.S. goods particularly those related to agriculture and manufacturing which Washington had long criticized as being too high.

“They are going to pay 19% and we are going to pay nothing… we will have full access into Indonesia,” he said.

The agreement also includes significant purchases: Indonesia has agreed to acquire $15 billion worth of U.S. energy, $4.5 billion in American farm goods, and 50 aircraft from Boeing, Trump later confirmed on his social media account.

These commitments, however, appear more modest than projections made earlier in the month by trade insiders close to the matter.

Prabowo, when speaking to reporters, did not detail the numbers but referred broadly to the themes of the deal outlined by Trump.

“We need planes, and they want to sell,” Prabowo told reporters. “Boeing is quite good, and we’ll also continue to work with Airbus.”

“We also need things. For example, we still import fuel, gas, wheat, soybeans and so on. And we managed to find common ground,” he added.

While he didn’t explicitly confirm that American products would enter Indonesia tariff-free, he noted, “we have negotiated everything”.

“We also have our own position. This is our offer, and we simply can’t afford to buy more. But the key thing for me is that our workers are safe,” he said.

Indonesia is one of the United States’ top 25 trade partners. In the past year, it exported about $28 billion worth of goods to the U.S., including items such as footwear, palm oil, and apparel.

One U.S.-based economist remarked that the benefits to Indonesia appeared to lean more toward political gains than economic ones.

“Certainly, [the US does] have some major imports categories from Indonesia – electronics, apparel, footwear, palm oil products which are used in cosmetics,” he said.

“Relative to total trade, the US is a significant importer from Indonesia, though not as great as some of its Asian trading partners.”

Beyond Indonesia, similar deals have been reached with just a few other countries so far including Vietnam, China, and the UK. In each case, the agreements have left many tariffs unchanged and lacked clear resolutions on several trade issues.

A former senior economic official familiar with White House trade strategy said he expects additional trade deals to be announced soon. He also noted that some governments now appear more willing to accept compromises they would have rejected in the past.

He referenced remarks made recently by Canada’s prime minister, suggesting the possibility of settling for tariff levels previously deemed unacceptable.

“The tone is changing a lot,” he said, noting a shift in how countries are approaching negotiations.

“For governments, I think it’s best to be at the negotiating table rather than to walk away,” he added.