Indonesia hails ‘new era’ with US after Trump lowers tariff to 19%

JAKARTA (AFP): Indonesia’s leader lauded on Wednesday a “new era” of trade relations with the U.S., following President Donald Trump’s announcement that he had lowered the tariff rate faced by Southeast Asia’s largest economy from 32% to 19%.

The Trump administration has been under pressure to finalize trade pacts after promising a flurry of deals recently, as countries sought talks with Washington to avoid the U.S. president’s threatened tariffs, announced in April but delayed until August.

“I had a very good call with President Donald Trump. Together, we agreed and concluded to take trade relations between Indonesia and the U.S. into a new era of mutual benefit,” Indonesia’s President Prabowo Subianto wrote in an Instagram post.

Prabowo, a populist former general, posted pictures of himself laughing on the phone with Trump but did not give any specifics of the deal.

However, Prabowo’s presidential spokesperson confirmed the new 19% rate and stated that it resulted from direct negotiations between the Indonesian leader and Trump.

“It is an extraordinary negotiation conducted directly by our president with President Donald Trump,” Hasan Nasbi said, adding that the deal was “progress that cannot be called small.”

Prabowo was set to land back in Indonesia on Wednesday afternoon from a trip to Europe, before giving a statement, Nasbi said.

Trump said Tuesday he had struck the pact in return for significant purchase commitments from Jakarta following negotiations, including a pledge to buy 50 Boeing jets.

In return for a lower tariff, Indonesia has committed to spending billions to increase energy, agriculture and merchandise imports from the U.S.

Trump and Prabowo have developed a warm relationship since the U.S. leader first clinched the presidency in late 2016.

His first administration dropped a de facto U.S. visa ban for Prabowo over alleged crimes committed under late dictator Suharto, inviting him to Washington in 2020 when he was the Indonesian defense minister.

‘Significant risk’
Prabowo had sent his top economic minister to Washington and his administration secured a better deal than the 20% that Trump said he had given to Southeast Asian neighbor Vietnam.

Both Indonesia and Vietnam are key markets for the transshipment of Chinese goods. Trump said the deal with Indonesia would include a penalty for goods transiting Indonesia from China.

Prabowo had suggested after the initial tariff threat in April that Trump might be helping Jakarta by prompting it to reconsider its trade surplus with the world’s largest economy.

Data from the U.S. Trade Representative’s office indicates that Washington’s goods trade deficit with Indonesia was $17.9 billion in 2024, a 5.4% increase from the previous year.

But experts said the deal appeared to be one-sided.

“The 19% tariff on Indonesian exports to the U.S., while the U.S. can enjoy 0%, actually poses a significant risk to Indonesia’s trade balance,” said Bhima Yudhistira Adhinegara, executive director of the Center of Economic and Law Studies.

“Do not be too reliant on exports to the U.S., because the result of the tariff negotiation is still detrimental to Indonesia’s position.”