President Donald Trump said he reached a deal with Indonesia that will tariff its goods at 19%, adding that the Southeast Asian nation agreed to erase all duties on US imports and buy more than US$19 billion ($24.4 billion) of American products including 50 Boeing jets.
“We are going to have full access to Indonesia,” Trump told reporters Tuesday at the White House. “They are paying 19% and we are not paying anything.”
Trump said later on social media that Indonesia agreed to purchase US$15 billion in US energy and US$4.5 billion worth of agricultural products, adding that “many” of the Boeing planes would be 777s.
No timing or details of the purchases were disclosed, and Jakarta hasn’t confirmed the tariff rate. Indonesia’s benchmark stock index rose 0.6% at the open on Wednesday.
A pact with Indonesia, which was earlier threatened with a 32% tariff, would be the first struck with a country targeted by Trump’s tariff letters sent over the last week, aimed at increasing pressure on negotiators ahead of an Aug 1 deadline for higher duties to take effect.
The breakthrough will provide some relief for Indonesia, which counts the US as its second-largest export market for goods ranging from apparel to palm oil — two sectors that are also responsible for millions of jobs in the country. The government had cut its growth forecast this year to 5% from 5.2% to account for the trade war fallout.
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The rupiah (INR) strengthened as much as 0.2% against the dollar (US$) in offshore trading after the deal was announced, before reversing all gains. It was little changed on Wednesday morning at 16,281, ahead of an interest rate decision by the country’s central bank later in the day.
Still, the latest 19% tariff rate — while much lower than most peers in Asia — would be a sharp increase from the 5% average US tariff on Indonesian goods in 2024, according to Bloomberg Economics’ Adam Farrar and Rana Sajedi.
“Our preliminary estimates suggest Indonesia could still lose 25% of its exports to the US in the medium term, putting 0.3% of its GDP at risk,” they said in a note.
See also: EU official says bloc to explore Asia pacts as US tariffs loom
The figures Trump posted would effectively erase Indonesia’s US$18 billion trade surplus last year with the US, one of the key metrics he’s used in his tariff targets.
He also threatened higher tariffs on goods transshipped through the country, a similar demand he’s made on regional neighbors aimed at stopping Chinese goods from dodging US barriers.
Trump initially announced the accord on social media, without providing specifics, and said he dealt directly with Indonesian President Prabowo Subianto to finalise the deal.
Coordinating Ministry for Economic Affairs Secretary Susiwijono Moegiarso said in a text message late Tuesday that the country is preparing a joint statement with the US, which will detail additional information, including non-tariff measures and commercial agreements.
“The President will provide further details upon returning from his overseas visit,” Hasan Nasbi, head of Indonesia’s Presidential Communications Office, said in a text message on Wednesday.
Prabowo is returning to Jakarta after trips to Brazil to attend the BRICS Summit and then Belgium to meet with the European Union.
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Based on the details posted by Trump, the provisions of the latest tariff deal hew closely to what Indonesia had offered earlier this month. Southeast Asia’s largest economy had proposed near-zero tariffs on about 70% of US imports, as well as increased purchases of US energy products, wheat and aircraft. It also offered greater cooperation in critical minerals and defense.
Indonesia’s top negotiator, Minister Airlangga Hartarto, last week met with US officials, including Trade Representative Jamieson Greer, Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent.
An agreement with Indonesia would be the fourth trade framework Trump has announced since pausing his country-specific tariffs, after Vietnam and the UK. The US and China also reached a tariff truce that includes the planned resumption of critical minerals and technology trade between the world’s two largest economies.
The pacts have so far fallen short of full-fledged trade deals, with many details left to be negotiated later and questions lingering about how solid the agreements are.
For instance, Trump provided no details to back up his claims of a deal with Vietnam, and the country’s leadership was caught off guard when he declared that Hanoi agreed to a 20% tariff. The Vietnamese government is still seeking to lower the rate, according to people familiar with the matter.
Garuda questions
It’s also unclear if some of the big-ticket deals he’s touted are realistic. For instance, Indonesia’s state-owned airline Garuda is short on cash and hasn’t taken delivery of dozens of Boeing planes it already ordered.
PT Garuda Indonesia, as it’s officially known, ordered 50 of the firm’s 737 Max jets from a deal that it made last decade, according to Boeing’s website. The airline took delivery of one of the narrowbody jets before halting the rest after a 2018 crash, the first of two fatal accidents that sparked a global grounding of the model.
Trump has kept foreign governments and investors on edge about his tariff agenda, with partners rushing to avoid higher import taxes and markets facing yet another dose of uncertainty. The US president indicated Monday he preferred to stick with the levies in his letters, saying, “I really don’t want deals. I just want the paper to get sent.”
The president also said he was willing to continue talks with major economies, including the EU.
The slew of tariff threats from Trump have prompted economies to broaden trade ties beyond the US, including Indonesia, which reached a tentative economic agreement with the EU over the weekend.
“There is quite a level of frustration with these deals and more talk about exploring those other options, to include Europe,” said Erin Murphy, senior fellow on emerging Asia economics at the Center for Strategic and International Studies.
Southeast Asian nations have long been caught in the economic and political battles between the the US and China. Thailand is in ongoing talks and mulling how to reduce US duties without giving away too much and stoking domestic unrest.
Philippine officials also are pushing to secure a pact ahead of the new deadline, with President Ferdinand Marcos Jr set to visit Washington later this month in an effort to reduce or eliminate Trump’s planned 20% tariff on the island nation.
