BUSINESS – Indonesian President Prabowo Subianto and U.S. President Donald Trump have clinched a tariff agreement that freezes U.S. tariffs on Indonesian exports at 19%—a significant reduction from the previously threatened 32% – while U.S. goods enter Indonesia tariff-free. The deal, confirmed in a call between Trump and Prabowo, reflects intense diplomacy and high-stakes negotiations aiming to defuse the looming threat of punitive tariffs set to take effect August 1.
As part of the agreement, Indonesia has pledged to purchase 50 Boeing jets, and invest heavily in American energy ($15 billion) and agricultural products ($4.5 billion). Trump heralded the pact as opening U.S. access to Indonesia’s vast market, adding that “they are going to pay 19% and we are going to pay nothing,” while enjoying “full access to Indonesia”.
Domestically, Prabowo portrayed the accord as ushering in a “new era” of bilateral ties, praising the deal as a diplomatic success for Indonesia. Economic analysts echoed this sentiment, noting that the moderated tariff rate leaves Indonesia better positioned than other Southeast Asian countries under Trump’s trade policies.
However, experts warn of substantial trade-offs. While energy and agricultural sectors stand to gain, labor-intensive industries like footwear and textiles may still suffer from the 19% levies. And the deal does nothing to curb collateral damage from broader U.S. tariffs on China—Indonesia’s main trading partner—a factor that could dampen growth.
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Emerging voices from academic and policy circles also question the fallout. According to Dr Siwage Dharma Negara of ISEAS, while Prabowo and Trump have sealed the deal, “at what cost to Indonesia?”. Concerns focus on the risk that Indonesia may be sacrificing trade diversification and exposure to geopolitical instability in favor of short-term tariff relief. A side effect of the deal is that Indonesia has tied up significant resources purchasing U.S. goods, raising questions about long-term fiscal consequences and overreliance on strategic concessions. While the agreed volume of Boeing jets and energy purchases may stimulate specific sectors, it may bypass broader structural growth.
The 19% tariff, although an improvement, means Indonesia remains subject to a higher threshold than the global average—suggesting that competitiveness across sectors such as electronics or processed goods could still be constrained. Importantly, the deal’s broader context—amid Trump’s escalating tariffs on multiple trading partners such as the EU and Japan—raises concerns that Jakarta may find itself caught in a geopolitical trade turbulence.
While financial markets initially responded positively—the Indonesian stock index rose roughly 0.7%—analysts caution that long-term benefits depend on Indonesia’s ability to shield itself from future external shocks. Critics argue Jakarta must now intensify efforts toward export diversification, domestic industry upgrading, and broader trade partnerships—like the pending EU‑Indonesia agreement.
The tariff accord thus represents a diplomatic victory, but one entangled with strategic compromises. As Indonesia braces for higher bills on consumer imports and allocates resources toward pledged U.S. purchases, the true measure of success will lie in balancing short-term relief with sustainable economic resilience amid a volatile global trade landscape.
