Indonesia Escapes 32% Tariffs as Trump Seals Landmark 19% Trade Agreement

President Donald Trump and Indonesian President Prabowo Subianto on Thursday finalized a sweeping bilateral trade agreement aimed at reducing tariffs and expanding commercial ties between the two economies. The pact concludes months of negotiations and is expected to significantly lower US tariff pressure on Indonesian exports while opening Indonesia’s vast market more widely to American goods and services.

The agreement was confirmed during the leaders’ meeting on the sidelines of the Board of Peace inaugural gathering in Washington, according to a White House statement. Both sides reaffirmed their commitment to implementing the deal and directed their teams to take further steps toward strengthening what officials described as a “new golden age” in US-Indonesia relations.

Under the terms, Indonesia will avoid previously threatened US tariffs of 32%, instead facing a reduced 19% rate on most exports. The pact also removes heightened duties on several Indonesian products, including palm oil, spices, and pharmaceuticals. Additionally, a special mechanism will allow certain Indonesian textiles and apparel shipments to qualify for tariff exemptions, providing relief to one of the country’s key export industries.

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In return, Indonesia has agreed to eliminate levies on more than 99% of US goods and dismantle a range of non-tariff barriers. Indonesian firms are expected to significantly boost purchases of American products, including about $15 billion in US energy, $13.5 billion in commercial aircraft purchases expected to benefit Boeing, and $4.5 billion in agricultural commodities such as cotton, soybeans, wheat, beef, rice, and corn. These measures are intended to help narrow Indonesia’s roughly $16 billion trade surplus with the United States.

The deal also addresses digital trade and supply chain cooperation. Jakarta has pledged to reform its pre-shipment inspection regime, remove tariffs and fees on digital services, and facilitate up to $10 billion in outbound direct investment into the United States. On critical minerals, Indonesia said US companies would be granted extraction access on terms similar to domestic investors, supporting Washington’s broader push to diversify supply chains away from China.

Officials said the agreement builds on a framework first reached in July and helps preserve annual bilateral trade exceeding $40 billion. The signing comes as Indonesia faces economic headwinds, including currency pressure and investor concerns about governance. Analysts say the lower tariffs could support foreign-exchange inflows and strengthen trade momentum between the two countries, while giving US companies improved access to the world’s fourth-most populous market.

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