Indonesia's Nickel Prospects Following New Trade Agreement

In mid-February 2026, President Prabowo Subianto and President Donald Trump formally signed a landmark document titled the “Economic Cooperation Framework”, representing a pragmatic breakthrough amid the wave of global protectionism that had previously threatened Indonesia’s economy.

Through what can be considered effective diplomacy, the Prabowo administration successfully renegotiated Indonesia’s position with the United States, securing a general tariff rate of 19 percent, significantly lower than the initial threat of 32 percent. Beyond this, the diplomatic victory also secured zero tariffs for thousands of Indonesia’s premier products, spanning from plantation commodities to electronic components for the future.

In return, Jakarta made substantial commitments. Indonesia agreed to provide wider and more open market access for American products, including pledges to purchase energy, agricultural products, and aircraft fleet valued at $33 billion USD. Within this massive package, critical minerals—with nickel at the forefront—became the central axis of bilateral relations.

Concerns briefly emerged that the agreement might collapse after the American Supreme Court invalidated the legal basis of President Trump’s “Liberation Day” announcement. The White House responded by switching the legal foundation to “Section 122” of the 1974 Trade Act, adding new tariffs of 10–15 percent with a 150-day grace period. The American court decision did not actually invalidate the bilateral agreement between the United States and Indonesia. The government could choose either to return to old tariffs plus 10–15 percent or maintain the new bilateral agreement.

However, given the substantial advantages of the new agreement, the government is likely to maintain it, seeking relief on specific elements, particularly regarding obligations to purchase American products. The bulk of the main agreement, including American access to Indonesia’s critical minerals, is expected to be retained given the geopolitical leverage this provides to counterbalance China’s dominance in this sector.

For years, Indonesian processed nickel has been constrained by America’s highly protectionist Inflation Reduction Act (IRA). Without a new trade agreement, electric vehicle batteries containing Indonesian nickel would not qualify for American subsidies. The new agreement effectively unlocks this gate, providing Indonesian nickel with legal legitimacy to enter America’s green energy ecosystem and offering investors certainty that national downstream products have a stable premium market in the West.

This strategy represents a rather brilliant form of “hedging” by the government. By securing export routes to America, dependence on a single market in East Asia will begin to erode. This success signals strongly that the Indonesian nickel industry is poised for advancement and ready to meet the high standards of the global automotive sector.

Additionally, the adoption of Environmental, Social, and Governance (ESG) standards, which are mandatory requirements in America, will serve as a hidden blessing. World-class ESG standards will force smelters to transform into greener and more humane operations. This will undoubtedly provide a way out from the “dirty nickel” stigma that has long been used to undermine Indonesia’s position. This standardisation is not merely a matter of paper compliance, but also an operational paradigm shift. Mining companies must begin integrating rigorous carbon audits and ensuring fair local community engagement.