Indonesia and US reach trade deal after "extraordinary struggle"

Indonesia has reached a trade deal with the US after an "extraordinary struggle" in negotiations, reducing proposed US tariff rates on Indonesian exports from 32% to 19%. The deal includes Indonesia committing to purchasing 50 Boeing jets, $15bil in US energy, and $4.5bil in US agricultural products. The Indonesian stock index rose as much as 0.7% on the news, with analysts calling it a positive catalyst for economic activities.

Indonesia and the United States have finalized a trade agreement, significantly altering the tariff landscape for Indonesian exports. The deal, announced by President Donald Trump on Truth Social, reduces the proposed US tariff rates on Indonesian goods from 32% to 19%. This agreement marks a notable shift in the bilateral trade dynamic and includes substantial commitments from Indonesia to the US.

As part of the deal, Indonesia has pledged to purchase 50 Boeing jets, $15 billion worth of US energy products, and $4.5 billion in US agricultural products [1]. The Indonesian stock index responded positively to the news, rising as much as 0.7% on July 2, 2025, with analysts calling it a catalyst for economic activities.

The agreement is the result of intense negotiations between the two countries. Indonesia's Coordinating Minister for Economic Affairs, Airlangga Hartarto, stated that the 32% tariff was being postponed while further discussions continue over the next three weeks. This indicates a willingness from both sides to reach a mutually beneficial agreement [1].

The deal is expected to narrow Indonesia's trade surplus with the US. According to economist Eko Listiyanto, the new tariff rates will reduce Indonesia's trade surplus with the US, although the 19% tariff is the best outcome given Indonesia's limited bargaining position [3]. The US remains Indonesia's largest source of trade surplus, with a recorded surplus of $5.44 billion from January to April 2025 [3].

The trade deal also includes a significant order for Boeing aircraft. Indonesia has committed to purchasing 50 Boeing jets, which is part of a broader economic agreement unveiled during President Prabowo Subianto's visit to Washington. This order is likely to support Boeing's operations and potentially create jobs in the US [2].

While the details of the Boeing order remain unclear, the commitment indicates a strong interest from Indonesia in US aircraft. Garuda Indonesia, the primary customer behind the Boeing deal, has struggled financially but may receive support from Indonesia's sovereign wealth fund, Danantara, to facilitate the purchase [2].

In conclusion, the Indonesia-US trade deal represents a significant step forward in bilateral trade relations. The reduced tariffs and increased commitments from Indonesia are expected to have a positive impact on both economies. The deal also highlights the potential for increased collaboration and investment between the two countries.

References:
[1] SupplyChainDive. (2025). Trump tariffs Indonesia deal. Retrieved from https://www.supplychaindive.com/news/trump-tariffs-indonesia-deal/753141/
[2] SimpleFlying. (2025). Boost Boeing Bahrain Indonesia invest big US. Retrieved from https://simpleflying.com/boost-boeing-bahrain-indonesia-invest-big-us/
[3] Jakarta Globe. (2025). Indonesia's trade deal not ideal economist says. Retrieved from https://jakartaglobe.id/business/indonesiaus-trade-deal-not-ideal-economist-says