Indonesia and the US Officially Sign 'Historic' Reciprocal Tariff Agreement

Indonesia and the United States (US) officially signed an Agreement on Reciprocal Trade (ART) on Thursday, the 19th of February, local time. The signing took place directly by the President of the Republic of Indonesia, Prabowo Subianto, and US President Donald Trump on the sidelines of Subianto’s visit to Washington, D.C. The ART stipulates that the US will impose a 19% import tariff on Indonesian goods. This figure is considered one of the lowest in the ASEAN region. This figure is, furthermore, significantly lower than the previously set 32%. The decision was reached after lengthy negotiations between the two countries since last year. Moreover, Indonesia and the US have agreed to strengthen economic cooperation and encourage economic growth through the establishment of the Council of Trade and Investment. All investment and trade issues between Indonesia and the US will, therefore, be discussed first at this council, should there be excessive increases or other issues deemed to disrupt the balance of payments between the two countries. The ART further revealed that there are at least 1,819 tariff lines for Indonesian products in the Bylaws, both agricultural and industrial commodities, with 0% tariffs. These commodities include palm oil, coffee, cocoa, spices, rubber, and electronic components, including semiconductors and aircraft components. The US also applies 0% tariffs specifically for Indonesian textiles and apparel products through a Tariff Rate Quota (TRQ) mechanism. The tariff reduction was achieved through a negotiation scheme that included opening up broader domestic market access for US products, including adjustments to several tariffs and non-tariff barriers. The Indonesian government views this step as an effort to maintain the competitiveness of Indonesian exports while maintaining the stability of bilateral trade relations with one of its key strategic partners. More specific details about the ART have been recently revealed through the latest post on the Indonesian Cabinet Secretary’s official Instagram page on Friday evening (the 20th of February), Jakarta time. “The trade agreement between Indonesia and the US, signed by President Prabowo Subianto and President Trump, marked a new milestone in economic relations between the two countries. Through intensive negotiations, with 90% of Indonesia’s proposals met, 1,819 national products received zero tariffs in the US market, including leading commodities such as palm oil, coffee, cocoa, and electronic components,” wrote the Indonesian Cabinet Secretary. Additionally, the Indonesian government highlighted how “historic” the newly signed ART is. In terms of commitment to strategic investment between Indonesia and the US, some of their main investment strategies include plans to purchase 50 Boeing aircraft and extend American mining company Freeport’s contract until 2061. “The agreement also includes a tenfold increase in textile exports, domestic food price protection and strategic investment commitments totalling US$38.4 billion,” wrote the Indonesian Cabinet Secretary as well.