EU, Indonesia Finalize Trade Deal, Cutting Tariffs on 96% of Goods

The European Union and Indonesia have finalized a trade agreement that will eliminate or reduce tariffs on nearly all goods to near-zero levels. This development comes as the United States, under the leadership of Donald Trump, sought to disrupt the global trade landscape. The agreement aims to strengthen bilateral relations between the EU and Indonesia, one of the largest economies in Southeast Asia.

The EU's trade chief stated that the agreement will also lift restrictions on key raw material trades. Additionally, the agreement is expected to save European exporters approximately 600 million euros (700 million USD) in tariffs. "We are indeed opening a significant new chapter," the trade chief said upon arriving in Indonesia. "Our trade with Indonesia has not yet reached its full potential," noting that Indonesia's economy is larger than that of Vietnam, the Philippines, and Thailand combined.

European officials have intensified negotiations with some of the world's largest economies, including India, and have completed talks with the Southern Common Market (Mercosur), which includes Brazil and Argentina. The EU has also strengthened its negotiations with Vietnam, the Philippines, and Thailand. The agreement will reduce tariffs on 96% of goods to zero over a five-year period. This is expected to increase EU exports to Indonesia by at least 30%, amounting to approximately 3 billion euros.

Officials noted that tariffs on EU automobiles will be reduced from 50% to zero over five years, while tariffs on machinery and household appliances will be reduced from 30% to zero in the short term. Agricultural products and food items will also benefit from trade liberalization. For materials exported from the EU, such as chemicals, the agreement will eliminate permits and other restrictions. In return, the EU will receive tariff preferences for Indonesian material exports (after the first stage of processing). However, the agreement will not alter Indonesia's ban on exporting nickel to the EU, which remains a contentious issue between the two parties at the World Trade Organization.

The agreement will take effect once it is approved by EU member states, the European Parliament, and Indonesia's legislative body. The trade chief described the agreement as a "very clear framework" that will promote trade and create opportunities for both parties.