Trump finalises trade deal with Indonesia: Tariff set at 19%, major export commitments for US

US President Donald Trump announced on July 15 that the United States had finalised a new trade deal with Indonesia, significantly reducing tariffs on US exports while imposing a 19 per cent tariff on Indonesian goods. This agreement is seen as a key step in Trump’s ongoing effort to address the US trade deficit and secure better trade terms with foreign partners. Under the terms of the deal, Indonesia will pay a 19 per cent tariff on its exports to the US, a substantial reduction from the previously threatened 32 per cent tariff.

“Great deal, for everybody, just made with Indonesia,” Trump wrote in a post on Truth Social, adding that details would follow soon. “They are going to pay 19 per cent, and we are going to pay nothing... full access to Indonesia.”

The agreement, which was finalised through direct negotiations between Trump and Indonesian President Prabowo Subianto, is part of a broader strategy to reduce US trade imbalances with key nations. Trump also revealed that Indonesia had committed to purchasing significant amounts of US exports, including $15 billion worth of US energy, $4.5 billion in agricultural products, and 50 Boeing jets, many of which would be 777 models.

While Indonesia does not rank among the top 15 trade partners of the United States, the trade value has been growing over the past few years. Indonesia’s total trade with the US stood at just under $40 billion in 2024. US exports to Indonesia grew 3.7 per cent last year, while imports from there were up 4.8 per cent, leaving the US with a goods trade deficit of nearly $18 billion.

Tariff reductions and new trade commitments

The deal with Indonesia marks a significant shift from earlier threats of steep tariffs. US Commerce Secretary Howard Lutnick stated that the agreement would align with the administration’s broader objective of eliminating tariffs on US exports while imposing tariffs on imports, a model recently established with Vietnam.

“By eliminating tariffs on US goods, we’re unleashing the potential of our farmers, ranchers, and manufacturers,” Lutnick explained. The deal with Indonesia is expected to help reduce the nearly $18 billion trade deficit the US currently holds with the Southeast Asian nation, which recorded a total trade volume of approximately $40 billion with the US in 2024.

Wider global trade pressures and ongoing negotiations

Despite the announced deal, Trump’s broader tariff agenda has raised tensions with other trading partners. He has sent letters to over 20 nations, including the European Union, Japan, and Malaysia, warning of new tariff rates if negotiations do not result in better terms by the August 1 deadline.

While Trump has made strides with countries like Vietnam and the UK, the uncertainty surrounding the implementation of these agreements continues to leave foreign markets on edge. The trade deal with Indonesia, however, provides a glimmer of hope for US exporters and marks another step in Trump’s “America First” trade strategy.

(With inputs from agencies)