Indonesia and the United States finalized a landmark Reciprocal Trade Agreement that officially sets a 19% “reciprocal” tariff on most Indonesian goods entering the U.S.
The deal, signed in Washington by Indonesian President Prabowo Subianto and U.S. President Donald Trump, resolves months of uncertainty after the U.S. had previously threatened to hike tariffs on Indonesian imports to as high as 32%.
Key Terms of the Agreement
The deal is structured as a “win-win” intended to rebalance a trade relationship where the U.S. ran a $23.7 billion deficit with Indonesia in 2025.
- The 19% Cap: Most Indonesian exports to the U.S. will now face a flat 19% tariff. This rate puts Indonesia on par with regional peers like Malaysia, Thailand, and the Philippines, and slightly lower than the 20% rate currently applied to Vietnam.
- Strategic Exemptions (0% Tariff): Indonesia secured total tariff exemptions for its most vital commodities:
- Palm Oil: A critical victory for Jakarta, as palm oil accounts for roughly 9% of its total exports.
- Other Commodities: Coffee, cocoa, natural rubber, chocolate, and spices will also enter the U.S. tariff-free.
- Textile “Quota” System: A special mechanism will allow certain Indonesian textiles and apparel to enter the U.S. at 0% tariff, provided they are manufactured using U.S.-sourced inputs like cotton and synthetic fibers.
What Indonesia Conceded
In exchange for the 19% cap and commodity exemptions, Indonesia agreed to major regulatory shifts:
- Elimination of Barriers: Indonesia will remove tariffs on over 99% of U.S. products, including chemicals, automotive goods, and high-tech equipment.
- Purchase Pledges: Jakarta committed to buying $33 billion worth of U.S. goods, including:
- $15 billion in energy commodities (LPG, crude oil).
- $13.5 billion in aerospace (including 50 Boeing jets).
- $4.5 billion in agricultural products (soybeans, wheat, corn).
- Critical Minerals: Indonesia will lift export restrictions on industrial commodities like nickel and cobalt for U.S. buyers, helping the U.S. reduce its supply-chain dependence on China for EV batteries.
- Standard Acceptance: Indonesia will now recognize U.S. FDA standards for medical devices and pharmaceuticals, as well as U.S. federal motor vehicle safety standards.
Economic & Political Significance
The deal was signed on the sidelines of the inaugural Board of Peace meeting. President Trump praised the agreement as part of a “New Golden Age” for the U.S.-Indonesian alliance.
“They are going to pay 19% and we are going to pay nothing… we will have full access into Indonesia.” — President Donald Trump
“This deal respects the sovereignty of both countries… it is a win-win.” — Airlangga Hartarto, Indonesia’s Coordinating Minister for Economic Affairs.
The agreement provides much-needed stability for the Indonesian economy, which faced recent headwinds after MSCI warned of a potential market downgrade and Moody’s lowered its credit outlook due to policy uncertainty.
