Post by : Meena Ariff

Photo: Reuters

Indonesia is working hard to finalise its new trade deal with the United States after the US agreed to reduce tariff rates on Indonesian goods. This news came on Friday from a senior Indonesian official, who explained that while the deal has been reached in principle, both countries are still discussing the small details before it is fully confirmed.

Tariffs reduced from 32% to 19%

The trade deal has led to a reduction in the proposed tariff rate from 32% to 19%. This means that when Indonesian products are sold to the US, they will now face a lower tax, which will make them cheaper for American buyers and help Indonesian businesses sell more. However, this 19% tariff will still be added on top of the existing sectoral tariffs that are already charged on certain products.

This agreement is one of the few deals that the US government has managed to finalise before its negotiation deadline of August 1. For Indonesia, it is an important step to strengthen its trade ties with the United States, which is one of its major export destinations.

Indonesia Requests Exemptions for Key Exports

Indonesia has also asked the US government to exempt some of its important exports from these tariffs. These include cocoa, rubber, crude palm oil, and nickel. These products are very important for Indonesia’s economy because they bring in a lot of foreign money, create jobs, and support farmers and industries in the country.

The official explained that these exemptions will help Indonesian exporters remain competitive in the US market. If these products are exempted from tariffs, their prices will remain low for American buyers, increasing demand and benefiting Indonesia’s economy.

World’s Biggest Palm Oil Producer

Indonesia is the world’s largest producer of palm oil, which is used in cooking, food processing, and many daily products like soaps and cosmetics. It is also the biggest supplier of palm oil to the United States, providing 85% of all palm oil imported by America in 2024. Because of this, Indonesia is pushing for palm oil to be excluded from the new tariffs so that its market share is not affected.

A senior economic official said, “This is a good opportunity, this will become a good factor for us. The deal should be good to support our exports.” This shows how hopeful the government is that the new agreement will help the country’s businesses grow.

Exemptions for US Technology Products

In return, Indonesia has agreed to exempt US technology products from its “local content” rules. These rules usually require foreign companies to use locally-made parts and components when making products in Indonesia. By giving this exemption, American tech companies will find it easier and cheaper to sell their products in Indonesia, which will improve business ties between both countries.

Indonesia Plans to Buy Boeing Jets and Import US Energy

As part of the trade relationship, Indonesia will also buy jets from Boeing, the famous American airplane manufacturer, for its national airline, Garuda Indonesia. This will help Garuda upgrade its fleet with newer planes that are safer and more fuel-efficient.

Additionally, Indonesia’s state energy company Pertamina will import energy products from the United States. However, these purchases will happen only after proper business reviews are done to ensure that the deals are fair and beneficial for Indonesia.

Zero Tariffs for Most US Goods

The official further explained that all US goods imported into Indonesia will face zero tariffs, except for alcoholic drinks and pork products, which will still have taxes. Also, some American goods will be freed from Indonesia’s import quota rules, meaning there will be no limit to how much can be imported. This will make it easier for Indonesian businesses and consumers to access more American products at better prices.

Why This Deal is Important

This trade deal is important for both countries. For Indonesia, it helps in increasing exports of its key products, especially palm oil, rubber, cocoa, and nickel. Selling these goods to the US means more money for the country, better income for farmers, and growth for factories and businesses.

For the United States, the deal ensures that American technology companies can export their products easily to Indonesia, which is one of the largest markets in Southeast Asia. It also helps the US sell more airplanes and energy products, creating jobs and supporting its industries.

Hope for the Future

Officials believe that finalising the fine details of this deal will take some more time, but they are confident that both countries will reach a fair agreement soon. The Indonesian government is trying to protect its local industries while also giving benefits to its trade partners to keep relations strong and friendly.

Impact on the Indonesian Economy

Trade deals like this can have a big impact on the country’s economy. By reducing tariffs and getting exemptions, Indonesia can sell more goods abroad, which brings in more foreign exchange. This money can then be used to build better roads, schools, hospitals, and create jobs for millions of people. It also improves the country’s image in the international market, making it a trusted partner for global trade.

In conclusion, Indonesia and the United States are working together to finalise a trade deal that will reduce tariffs, support exports, and make trade smoother between the two countries. While some details are still being discussed, the deal shows a positive step forward for Indonesia’s economic growth and its strong ties with one of the world’s largest economies. The government hopes that these negotiations will be completed soon to bring benefits for businesses, farmers, and the people of Indonesia.