Indonesia and US Finalize Zero Tariffs for Key Commodities
Indonesia and the United States are currently in the final stages of establishing a reciprocal tariff agreement that will eliminate import duties on select commodities, following high-level approvals from Indonesian President Prabowo Subianto and US President Donald Trump.
Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, announced that the legal drafting of this critical agreement is now underway, expressing strong optimism for its swift completion in the near future. The Minister emphasized the anticipation for this phase to be finalized promptly in Jakarta, allowing the benefits of the new trade framework to materialize.
The core principle of this reciprocal deal is the exemption of tariffs on goods that one country can produce efficiently while the other cannot, thereby fostering complementary trade rather than competition. Key Indonesian exports, such as palm oil, cocoa, and chocolate, are prime examples of commodities that will benefit from being subject to zero tariffs upon entering the US market. This is a massive win for Indonesian agricultural producers and a significant boost to its export value.
The journey to this agreement involved intensive negotiations; initially, the US had imposed a notably high 32 per cent import tariff on a range of Indonesian goods. Following diligent diplomacy, including a crucial phone call directly between the two presidents, this prohibitive rate was successfully lowered to a still-significant 19 per cent.
Minister Hartarto led the Indonesian delegation to the US to champion this reduction and finalize the mutual terms, highlighting the political will and commitment required to achieve this favorable outcome for Indonesian trade.
Reciprocal Commitments Bolster Strategic Partnership
The landmark tariff agreement is built upon substantial reciprocal commitments, ensuring a balanced and strategic economic partnership that benefits both nations and significantly deepens their trade ties.
As part of the comprehensive deal, Indonesia has committed to several high-value procurement agreements with the United States. These include the purchase of $15 billion worth of US energy products, securing vital resources while aiding US energy exports. Additionally, Indonesia has committed to purchasing $4.5 billion in US agricultural goods, further opening its vast market to American farmers.
A major element of the deal involves the aerospace sector, with Indonesia agreeing to purchase 50 new Boeing aircraft, primarily focusing on the Boeing 777 models. These acquisitions will modernize Indonesia’s airline fleets and demonstrate a firm commitment to the US manufacturing sector.
President Prabowo described the high-stakes negotiations as “tough” but ultimately successful, stressing that the agreement was reached through a mutual understanding of each country’s core interests. He proudly stated that, after the challenging talks with President Trump, “alhamdulillah, we reached an agreement,” confirming the successful outcome on July 16, 2025.
President Prabowo also emphasized that all decisions were made with meticulous care, ensuring that every policy and procurement commitment prioritized the protection of Indonesian workers within the national economic policies. This holistic approach ensures that while Indonesia gains greater access for its exports through reduced US tariffs and stronger trade relations, its domestic interests, particularly job security and economic stability, remain firmly protected from any potential adverse effects of liberalized trade.
Securing Economic Growth Amid Global Uncertainty
This strategic trade agreement marks a profoundly significant step in solidifying and strengthening the economic relations between Indonesia and the United States, providing a necessary anchor of stability amid persistent global economic uncertainties.
The mutual reduction and elimination of tariffs on key goods like palm oil and cocoa is expected to stimulate Indonesia’s export-oriented industries, creating new jobs and generating higher foreign exchange earnings, which are crucial for the country’s fiscal health. By securing favorable access for its major commodities, Indonesia is effectively hedging against volatility in other international markets and ensuring a more predictable revenue stream for its vital agricultural sector.
Furthermore, the scale of Indonesia’s commitment to purchasing US products—amounting to nearly $20 billion in energy and agriculture alone, plus the substantial aircraft deal—establishes a robust, long-term foundation for the bilateral relationship. This reciprocal flow of trade transforms the dynamic from a series of transactional deals into a deeply integrated and mutually dependent strategic partnership.
The successful negotiation and impending finalization of the zero tariffs agreement serves as a clear model for how two major economies can overcome protectionist pressures and find common ground for expanded trade that benefits their respective populations and industries. The ability to navigate tough tariff negotiations and secure such a broad agreement demonstrates Indonesia’s growing influence in global trade policy and its pragmatic approach to securing its national economic interests in a complex world.
