Indonesia says US trade deal reached after 'extraordinary struggle'

JAKARTA: Indonesia said on Wednesday it had reached a trade deal with the United States after an "extraordinary struggle" in negotiations which resulted in a reduction of proposed U.S. tariff rates on the Southeast Asian country's exports to 19% from 32%.

AI Brief

Indonesia agreed to buy US jets, energy, and agriculture goods in a new trade deal negotiated directly between Trump and Prabowo.
The deal includes a 19% flat tariff on Indonesian exports to the US, lower than feared, but penalties for goods transshipped from China.
Markets responded positively, but analysts warn Indonesias ties to China mean economic risks from US-China tensions still linger.

U.S. President Donald Trump said on Tuesday a deal had been struck after he spoke to Indonesian President Prabowo Subianto. The deal is among only a handful reached so far by the Trump administration ahead of an August 1 deadline for negotiations.

"This is an extraordinary struggle by our negotiating team led by the Coordinating Minister for Economic Affairs," Hasan Nasbi, the Indonesian president's spokesperson, told reporters on Wednesday.

Nasbi said Prabowo had also negotiated directly with Trump over the phone, without giving further details. He said Prabowo would hold a press conference later on Wednesday after returning from a foreign trip.

Indonesia and the United States have agreed to take trade relations into a new era, Prabowo said on his Instagram account, after what he described as "a very good call" with Trump.

Indonesia - the world's fourth-largest country by population and a member of G20 - ran a goods trade surplus of $17.9 billion with the United States in 2024, according to the U.S. Trade Representative.

Nasbi called the deal a "meeting point" between the two governments, and said Indonesia's tariff rate was much lower than other countries in Southeast Asia.

Indonesia, Southeast Asia's largest economy, has committed to purchasing 50 Boeing BA.N jets, $15 billion in U.S. energy, and $4.5 billion in U.S. agricultural products as part of its trade agreement with the United States, Trump said.

Trump outlined an Indonesia deal similar to a preliminary pact struck recently with Vietnam, with no levies on U.S. exports to Indonesia. It also included a penalty rate for so-called transshipments of goods from China via Indonesia.

Indonesia's stock index rose as much as 0.7% on Wednesday after the deal, which some analysts said would provide a positive catalyst for economic activities.

"Well, 19% is better than 32%," Matt Simpson, a senior market analyst at City Index in Brisbane, said.

"Indonesian non-oil exports such as footwear and textiles will take a hit, but energy and agriculture are set to gain. Officials are of course pleased because they're in Trump's good books," he added.

Natixis warned the Indonesian economy would still be affected by Trump's tariffs on China - Indonesia's biggest trade partner.

Myrdal Gunarto, an economist with Maybank Indonesia, described the deal as relatively good, as Jakarta is getting a tariff below those imposed on other Southeast Asian neighbours.

"(The deal) opens more space for domestic lower monetary policy rate," he said, predicting it would also trigger capital inflows.

A bare majority of analysts in a Reuters poll expected Indonesia's central bank to cut interest rates later on Wednesday to bolster economic growth.