Trade Agreement Risks Driving Up Food Prices

Economy senior researcher Tauhid Ahmad of the Institute for Development of Economics and Finance (INDEF) warned that the proposed Agreement on Reciprocal Tariff (ART) advocated by United States President Donald Trump risks driving up food prices in Indonesia. The risk is mainly associated with food commodities that still rely on imports.

‘So that is transmitted to prices; the price of products will rise, especially those on new contracts. If the contracts are old, there is still room for negotiation, but for new contracts, they will look at the spot price,’ Tauhid said at a press conference titled ‘US–Indonesia Agreement on Reciprocal Tariff: Strategic Impact Analysis for Industry in Indonesia’ at Hotel Des Indes, Central Jakarta, Thursday evening, 5 March 2026.

Tauhid explained that changes in global tariff policy can influence various cost components in international trade, from exchange rates to logistics costs. According to him, the change would ultimately be passed on to prices of products circulating in the domestic market.

He assessed that the impact would be faster in newly agreed trade contracts. Meanwhile, older contracts still have room for negotiation, so price increases would not be immediately felt.

However, Tauhid noted that the magnitude of potential food price increases is not yet certain, as further calculations are needed. He said the government should consider possible impacts of global tariff policy on domestic food price stability, particularly for commodities still dependent on imports.

Meanwhile, Trade Minister Budi Santoso said that agricultural commodities such as soybeans, wheat, and cotton are needed by industry and are not produced domestically. ‘They are mostly needed because they are raw materials. We also need soybeans; we import the most from America. If we do not facilitate that, it will trouble our industry. Wheat also; we need a lot,’ Budi said in Jakarta, 20 February 2026, as quoted by Antara.

Budi explained that with a 0 percent tariff, the national industry would obtain import ease and be able to reduce production costs. According to him, if raw materials can be obtained at cheap prices, then the final price of products can also be more affordable for the public.

‘The way to be cheap is to facilitate it, so we don’t end up paying a lot. If we buy expensive, the price of food will also be expensive,’ he said.