Trump Imposes a 19% Tariff on Indonesian Imports in New Trade Agreement; EU Prepares Countermeasures in Response
In a recent development, the United States and Indonesia have reached a significant trade agreement, marking a substantial reduction in tariffs for Indonesian exports to the U.S. The deal, announced by President Donald Trump, comes after threats of a 32% tariff under the administration's "Liberation Day" trade policy.
Under the new agreement, most Indonesian exports to the U.S. will be subject to a **19% tariff rate**, a reduction from the previously threatened level. This rate is the lowest negotiated among ASEAN countries under the current U.S. trade regime, giving Indonesia a competitive advantage over its regional peers. However, it's important to note that this 19% rate is imposed on top of existing sectoral tariffs, and negotiations are ongoing regarding product-level exemptions, particularly for Indonesian goods such as palm oil, cocoa, rubber, and nickel.
On the other hand, U.S. exports to Indonesia will face **zero tariffs**, except for alcoholic beverages and pork, and some goods will be exempt from import quota rules.
The deal also includes several commercial arrangements. Indonesia has committed to purchasing 50 Boeing aircraft, supporting its national carrier Garuda Indonesia. Indonesia’s state energy firm, Pertamina, will import $15 billion worth of U.S. energy products. Additionally, Indonesia will buy $4.5 billion of U.S. agricultural products. The agreement also exempts U.S. technology products from Indonesia’s "local content" rules, which previously required the use of locally made components.
The deal includes a U.S.-driven enforcement mechanism to prevent Indonesia from being used as a rerouting channel for goods from other countries, particularly China. Some details, including specific exemptions for certain Indonesian exports and other technicalities, are still under discussion. The two countries have also agreed to maintain ongoing bilateral dialogue on broader trade issues, including digital trade frameworks and supply chain cooperation.
The value of these goods is estimated to be around 6.35 billion euros. This agreement provides Indonesia with greater trade certainty and a favorable position relative to other Southeast Asian nations, while the U.S. secures significant commercial deals and strengthened enforcement against trade circumvention.
It's worth mentioning that the European Commission is preparing to target 72 billion euros ($84.1 billion) worth of US goods for possible tariffs if trade talks with Washington fail. This move by the European Commission pre-dates Trump's recent move to ramp up pressure on the EU over the weekend.
The US–Indonesia tariff agreement is among several trade agreements made by the Trump administration before an August 1 deadline. So far, such deals have been reached with the United Kingdom, Vietnam, and an interim deal has been struck with China to forestall the steepest of Trump's tariffs while negotiations continue between Washington and Beijing.
[1] White House Press Release, July 2023 [2] USTR Press Release, July 2023 [3] Reuters, July 2023
- The new trade agreement between the United States and Indonesia, a significant development, has resulted in most Indonesian exports to the U.S. being subject to a 19% tariff rate, the lowest negotiated among ASEAN countries under the current U.S. trade regime, thereby giving Indonesia a competitive advantage over its regional peers.
- The U.S.–Indonesia tariff agreement also involves several commercial arrangements, with Indonesia committing to purchasing 50 Boeing aircraft, importing $15 billion worth of U.S. energy products, and buying $4.5 billion of U.S. agricultural products. Additionally, the agreement exempts U.S. technology products from Indonesia’s "local content" rules.
- The deal includes a U.S.-driven enforcement mechanism to prevent Indonesia from being used as a rerouting channel for goods from other countries, particularly China, and ongoing bilateral dialogue on broader trade issues, including digital trade frameworks and supply chain cooperation.
- Meanwhile, the European Commission is preparing to target 72 billion euros worth of US goods for possible tariffs if trade talks with Washington fail, a move that pre-dates Trump's recent move to ramp up pressure on the EU over the weekend. This highlights the international politics and policy-and-legislation landscape that heavily impacts the tourism and finance industries, as well as the general news.
