Prabowo Confirms US to Impose 19% Tariff on Indonesian Goods

Gantry cranes and shipping containers at the IPC Container Terminal at Tanjung Priok Port in Jakarta. Photographer: Dimas Ardian/Bloomberg Photo by Dimas Ardian /Bloomberg

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(Bloomberg) — Indonesia’s president said he struck a 19% tariff deal with US President Donald Trump, the first confirmation of the key agreement detail after months of talks between the countries. 

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President Prabowo Subianto, speaking to reporters on Wednesday, said he had reached the deal following direct talks with Trump and that Indonesia would still continue to negotiate for a better trade relationship.

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“We understand their interests, and they understand ours,” Prabowo said, adding he may visit the US in September or October and that Trump is “quite a tough negotiator.”

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The terms of the deal had been in doubt since Trump earlier announced it, given that a separate pact he said he reached with Vietnam was never fully agreed to by Hanoi. The government in Vietnam is still seeking to lower the 20% tariff he imposed on the country, and was surprised when it was announced, according to people familiar with the matter. 

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Read More Vietnam Surprised by Trump Tariff Decision, Seeks Lower Rate

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Prabowo, however, didn’t confirm Trump’s claim that Indonesia would drop all tariffs on US imports. 

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He added that his country needed to import more fuel, wheat and soybean. Trump announced earlier that Indonesia agreed to purchase $15 billion in US energy and $4.5 billion worth of agricultural products, as well as 50 Boeing Co. jets. 

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The Indonesian president said the country would purchase more planes from the US firm, calling them “quite good” and saying “we need new aircraft” for the state carrier PT Garuda Indonesia, without adding specifics. 

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“There is a meeting of two interests,” he said. 

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The new level is a significant cut from the 32% Trump had threatened to impose starting August, and one of the lowest in the region, bested only by Singapore’s 10%.

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Asked whether the government is satisfied with current tariff levels, he said: “If we were satisfied, it would be zero percent.”

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“What matters is that our people are safe and our economy stays strong,” he said. “Whatever happens, we will remain resilient.”

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With a huge source of uncertainty gone, Indonesian assets will likely enjoy a short-term boost, according to analysts. What it means for the economy is less clear, especially with scant details on the provisions and timeline of the deal. The government earlier cut its growth forecast this year to 5% from 5.2% to account for the trade war fallout.

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Earlier on Wednesday Indonesia’s central bank unexpectedly cut interest rates and said it was ready to ease further if needed. Governor Perry Warjiyo said growth was expected to improve in the second half, supported by the US trade deal and because “uncertainty has gradually subsided.”