Trump, Prabowo Finalize Trade Deal Slashing Tariff Rate to 19%

Prabowo Subianto during the inaugural meeting of the Board of Peace on Feb. 19. Photographer: Chip Somodevilla/Getty Images Photo by Chip Somodevilla /Getty Images

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(Bloomberg) — President Donald Trump and Indonesian President Prabowo Subianto finalized a trade agreement Thursday, ending months of uncertainty with an accord that’s expected to lower US tariffs and see Jakarta facilitate the purchase of an estimated $33 billion in American goods.

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The leaders “confirmed their strong commitment to implementing” the deal and instructed their teams to “take further steps for a NEW GOLDEN AGE of the ever-growing U.S.-Indonesian Alliance” as they met on the sidelines of the Board of Peace’s inaugural meeting in Washington, according to a White House statement. 

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Under the deal, Indonesia — a Group of 20 nation that counts the US as its second-biggest export destination — will avoid the threatened 32% tariffs and instead face a 19% rate for most goods. 

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The agreement also eliminates heightened duties on some of Indonesia’s exports, including palm oil, spices, and pharmaceuticals. It creates a mechanism for certain textiles and apparel to earn tariff exemptions — boosting a key Indonesian industry.

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For the US, the pact aims to expand access to a fast-growing consumer market of more than 280 million people and bring Indonesian companies to source more from the US.

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Indonesia will eliminate levies on more than 99% of US goods and remove non-tariff barriers, while Indonesian businesses are expected to buy more US energy, agricultural products and other goods — steps meant to narrow Indonesia’s roughly $16 billion trade surplus with the US. 

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Those deals include the import of $15 billion in US energy, including $3.5 billion of liquefied petroleum gas, $4.5 billion of crude oil and $7 billion of refined gasoline. Indonesia is also expected to procure $13.5 billion in commercial aircraft, in what should be a boon for Boeing Co. And Jakarta has agreed to import $4.5 billion in US agricultural commodities — including cotton, soybeans, wheat, beef, rice and corn — as part of the agreement. 

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Indonesia will also reform its pre-shipment inspection processes to address concerns raised by US exporters and eliminate tariffs and fees on digital services. And Indonesia has said it will “endeavor to facilitate” $10 billion of outbound direct investment to the US, including engineering and construction projects as well as energy initiatives including the development of blue ammonia.

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“President Trump is unlocking Indonesia’s market of over 285 million people to create commercially meaningful opportunities for American farmers and manufacturers,” said US Trade Representative Jamieson Greer in a statement. “This landmark Agreement breaks down trade barriers while advancing the economic and national security interests of the American people.”

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Beyond tariffs, the agreement touches critical minerals, as the US seeks to reduce supply-chain dependence on China and secure inputs for EVs, defense, and manufacturing. Indonesia said it would allow US companies to extract critical minerals on terms similar to those for domestic investors, while Washington promised to consider offering investment financing through the Export-Import Bank and U.S. International Development Finance Corporation.