Indonesia reaches deal with US 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 US tariff rates on the Southeast Asian country’s exports to 19% from 32%.
US President Donald J. 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 Aug. 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.
Mr. Nasbi said Prabowo had also negotiated directly with Mr. 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.
Prabowo later said that his government understood the interests of the United States in trade talks, and that the two countries will continue to negotiate even after reaching the deal: “We’ve given our offer, we cannot give more.”
Indonesia -— the world’s fourth-largest country by population and a member of Group of 20 — ran a goods trade surplus of $17.9 billion with the United States in 2024, according to the US Trade Representative.
Mr. 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 jets, $15 billion in US energy, and $4.5 billion in US agricultural products as part of its trade agreement with the United States, Mr. Trump said.
Mr. Trump outlined an Indonesia deal similar to a preliminary pact struck recently with Vietnam, with no levies on US exports to Indonesia. It also included a penalty rate for so-called transshipments of goods from China via Indonesia.
The Jakarta stock index rose as much as 0.8% on Wednesday after the deal, which Indonesia’s central bank said would provide a positive catalyst for economic activities. The JKSE is up 10% since early April.
Bank Indonesia, which cut rates on Wednesday, said the deal will have a positive impact on the archipelago’s exports and economic growth, and provide certainty to financial markets.
“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 Mr. 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 neighbors.
“(The deal) opens more space for domestic lower monetary policy rate,” he said, predicting it would also trigger capital inflows. — Reuters
