On Wednesday, July 16th, the President of Indonesia stated that the US President, Donald Trump, is a “hard-nosed negotiator.” Prior to this, the US and Indonesia reached a trade agreement that proposed lowering the tariff rate from 32% to 19%.
President Trump announced the trade agreement with Indonesia on Tuesday. Indonesia committed to purchasing $15 billion worth of US energy products, $4.5 billion of US agricultural products, and 50 Boeing planes.
According to Reuters, on Wednesday, Indonesian President Prabowo Subianto, after a phone call with Trump, told reporters, “If I’m not mistaken, we have agreed to lower the tariff rate from 32% to 19%… I was negotiating at the time, but I must say, he (Trump) is a rather tough negotiator.”
Prabowo mentioned that he had conversations with Trump. He had previously visited Brazil to attend the BRICS Nations Conference. He added that while he understands the US perspective in negotiations, “we have given our proposals, we cannot give more.”
The agreement between the US and Indonesia, similar to the agreement with Vietnam, means US exports to Indonesia will not be subjected to tariffs.
According to the US Trade Representative, Indonesia, as the world’s fourth most populous country, had a trade surplus of $17.9 billion with the US in 2024.
Indonesian Presidential Spokesperson Hasan Nasbi earlier told reporters, “This has been an extraordinary effort by our negotiating team led by the Minister of Economic Affairs.”
Nasbi stated that Indonesia’s tariff rates are much lower compared to other Southeast Asian countries.
After the agreement was reached, the Jakarta Stock Exchange index rose by 0.8% on Wednesday. The Indonesian Central Bank stated that the agreement would provide a positive catalyst to economic activities. The Jakarta Stock Exchange has risen by 10% since early April.
On Wednesday, the Indonesian Central Bank lowered interest rates, stating that the agreement would have a positive impact on Indonesia’s exports, economic growth, and bring certainty to the financial markets.
A report from Capital Economics stated that a rate cut in Indonesia was likely regardless, but the trade agreement helps eliminate a key uncertainty factor.
The report mentioned, “While details are still unclear, the agreement appears to be similar to the one reached with Vietnam, once again emphasizing the goal of limiting the diversion of goods from China.”
In the agreement with Indonesia, Trump continues to combat transshipment activities. He stated that if any goods are rerouted through Indonesia from countries with higher tariffs to the US, those tariffs would be added to Indonesia’s tariffs.
“19% is better than 32% overall,” said Matt Simpson, Senior Market Analyst at City Index. “Non-oil exports of Indonesia, such as footwear and textiles, will be affected, but energy and agriculture will benefit. Officials are, of course, pleased as they have gained favor with Trump,” he added.
Myrdal Gunarto, an economist at the Indonesian branch of Malaya Bank, believes the agreement is relatively good as Indonesia obtained lower tariffs compared to other Southeast Asian neighboring countries.
“This opens up more space for lowering domestic monetary policy rates,” he stated. He also predicted that the agreement would trigger capital inflows.