JAKARTA: Indonesia’s new tariff deal granting the US duty-free access to its market is likely to undermine Southeast Asia’s largest economy, experts say, as the White House announced the agreement’s detailed terms on Wednesday.
Jakarta has agreed to drop its tariff on nearly all American imports to zero and scrap all non-tariff barriers facing American firms, while US tariffs on Indonesian imports would be set at 19 percent, according to a joint statement released by the White House.
The framework on the US-Indonesia Agreement on Reciprocal Trade was issued following negotiations that took place earlier this month, after President Donald Trump threatened to levy a 32 percent duty on Indonesian exports.
“The golden age is here … The United States and Indonesia have reached a historic trade deal,” the White House said.
The agreement will also exempt US food and agricultural products from Indonesia’s import licensing regimes, remove barriers for digital trade and remove export restrictions on critical minerals.
Jakarta’s new deal with Washington, which is expected to be finalized in the coming weeks, is putting Indonesia at a disadvantage, experts say.
“This deal is not benefiting us. We used to face zero tariffs and now it’s 19 percent. Even though this is lower than 32 percent, Indonesia shouldn’t have accepted the deal because we stand to lose here,” Yose Rizal Damuri, executive director at the Jakarta-based Center for Strategic and International Studies, told Arab News.
The US is Indonesia’s second-largest market after China, with exports valued at over $26 billion in 2024, according to Indonesia’s statistics agency.
Indonesia has consistently posted trade surpluses with the US in the past decade. Last year, that figure stood at about $16.8 billion.
The White House’s statement also mentioned “forthcoming commercial deals between US and Indonesian companies,” including aircraft procurement valued at $3.2 billion, purchase of agriculture products such as soybeans, wheat and cotton valued at $4.5 billion, as well as a $15 billion purchase of energy products.
Indonesia is among other Southeast Asian nations, including Vietnam and the Philippines, which have negotiated for a better tariff deal with the Trump administration.
Vietnam, which agreed to zero tariffs on American exports and 20 percent on its own goods, had a “better” deal compared to Indonesia, said Bhima Yudhistira, executive director at Jakarta-based think tank Centre of Economic and Law Studies.
“Vietnam’s tariff reduction from 46 per cent to 20 per cent is more significant than Indonesia’s tariff reduction from 32 per cent to 19 per cent. Vietnam’s negotiations were more effective than Indonesia’s. Ideally, Indonesia could achieve even greater reduction,” Yudhistira told Arab News.
The tariff deal also posed a “high risk” to Indonesia’s trade balance.
“The government should push for market access to Europe as a form of market diversification … as well as the intra-ASEAN (Association of Southeast Asian Nations) market,” Yudhistira said.
“It’s better not to depend on exports to the US because the result of these tariff negotiations is still unfavorable to Indonesia.”
