After announcing a blanket tariff on several countries effective August 1, 2025, Trump has announced a new tariff deal, this time with Indonesia. Previously, Indonesia was set to face a 32% tariff. However, the Prabowo administration promptly negotiated with Trump. As a result, Trump announced that, following the bilateral talks, the US has reduced the tariff on Indonesia to 19%, while US exports to Indonesia will be free of both tariff and non-tariff barriers.
Trump stated on his social media that, after talks with Indonesian President Prabowo Subianto, the finalized agreement will result in higher tariffs on goods transshipped to bypass stricter duties. However, it remains unclear when the lower tariff rate for Indonesia will go into effect. According to Trump, this tariff is necessary to address Indonesia’s years-long tariff and non-tariff policies, as well as trade barriers that have led to an unsustainable trade deficit.
The US-Indonesia trade cooperation shows that Indonesia has consistently maintained a trade surplus with the United States since 2015. In 2024, Indonesia’s exports to the US amounted to USD 28.182 billion, while US exports to Indonesia totaled USD 11.614 billion. In 2024, Indonesia recorded a trade surplus of USD 14.34 billion. Indonesia’s primary exports to the US include machinery and electronic equipment, apparel, footwear, and vegetable oils. While the main US exports to Indonesia comprise oilseeds and fruits, machinery and mechanical equipment, wood pulp, as well as aircraft, spacecraft, and their components.
The potential losses Indonesia could face if the previously announced 32% tariff were implemented include a 0.05% reduction in economic growth, a 7.34% contraction in the textile sector, a 22.11% contraction in the manufacturing sector, and a 10.14% contraction in the electrical equipment sector. Therefore, although no official statement has been issued by the Prabowo administration, Indonesia’s former Vice Minister for Foreign Affairs, Dino Patti Djalal, stated that government insiders expressed satisfaction with the new trade deal.
As part of the agreement, in addition to exempting tariffs on all products exported by the United States, Indonesia is also agreeing to several key commitments. These include purchasing USD 15 billion (IDR 244.074 trillion, at an exchange rate of IDR 16,271 per USD) worth of energy from the US, importing USD 4.5 billion (IDR 73 trillion) in US. agricultural products, and acquiring 50 Boeing aircraft, as announced by Trump on Truth Social.
By accepting a 19% tariff, Indonesia avoids the more severe economic consequences of a 32% rate, which could have significantly impacted key sectors. The agreement also provides market certainty for Indonesian exporters. On the other hand, the tariff disparity could make American imports more competitive in Indonesia, potentially affecting domestic industries.
While no specific details have been confirmed yet, on the surface, the new trade deal appears beneficial for both countries. Indonesia’s pledge involves purchasing goods it has already been importing, which could benefit Indonesian importers. However, a complete analysis will only be possible once both countries release the full details of the agreement.
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