Jakarta (AFP) – Indonesia’s president on Wednesday hailed a “new era” of trade relations with the United States, after Donald Trump said he would slash tariffs faced by Southeast Asia’s biggest economy from 32 percent to 19 percent. The Trump administration has been under pressure to wrap up trade pacts after promising a flurry of deals, as countries sought talks with Washington to avoid the US president’s threatened tariffs ahead of an August 1 deadline.
“I had a very good call with President Donald Trump. Together, we agreed and concluded to take trade relations between Indonesia and the United States into a new era of mutual benefit,” President Prabowo Subianto wrote on Instagram. Prabowo confirmed the new tariff rate after landing back in Indonesia from Europe. “We agreed…the tariffs to be lowered from 32 (percent) to 19 (percent),” he told reporters, adding he could visit Washington in September or October.
Prabowo, a populist former general, posted pictures of himself laughing on the phone with Trump, but did not give any specifics about their trade deal. Prabowo’s presidential spokesperson confirmed the 19 percent rate and said it was struck after direct negotiations. “It is an extraordinary negotiation conducted directly by our president with President Donald Trump,” spokesperson Hasan Nasbi said, adding that the deal was “progress that cannot be called small.” Trump said the rate reduction was in return for significant purchase commitments from Jakarta, including a pledge to buy 50 Boeing jets.
Indonesia has committed to spending billions to increase energy, agriculture, and merchandise imports from the United States. Trump and Prabowo have developed a warm relationship since the US leader first clinched the presidency in 2016. Washington invited then-defence minister Prabowo to visit in 2020, lifting a de facto visa ban, which had been in effect over alleged crimes committed during the reign of Indonesia’s late dictator Suharto.
– ‘Significant risk’ –
After Trump announced the tariffs in April, Prabowo sent his top economic minister to Washington and also suggested that Trump was maybe helping Jakarta by causing it to rethink its trade surplus with the world’s top economy. Data from the US Trade Representative office shows Washington’s goods trade deficit with Indonesia was $17.9 billion in 2024, up 5.4 percent from the year before.
The deal struck with Indonesia would be slightly better than the 20 percent given to Southeast Asian neighbour Vietnam. Both Indonesia and Vietnam are key markets for the shipment of Chinese goods. Trump said the deal with Indonesia would include a penalty for goods transiting Indonesia from China.
But experts said the Indonesia pact appeared one-sided. “The 19 percent tariff on Indonesian exports to the US, while the US can enjoy 0 percent, 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 US, because the result of the tariff negotiation is still detrimental to Indonesia’s position.”
© 2024 AFP
