WASHINGTON/JAKARTA -- U.S. President Donald Trump said on Tuesday that he had agreed to a trade deal with his Indonesian counterpart, Prabowo Subianto, that would see the "reciprocal" tariff rate on Southeast Asia's largest economy drop from the previously threatened 32% to 19%.
In return, Indonesia committed to buying $15 billion worth of U.S. energy, $4.5 billion of American agricultural products and 50 Boeing jets, "many of them 777's," Trump announced on social media. He also claimed that American exports to Indonesia will be free of both tariffs and nontariff barriers, a measure that sparked concern among Jakarta-based analysts.
Trump said he finalized the deal after speaking to Prabowo, much as he finalized an agreement with Vietnam after speaking with To Lam, the Vietnamese Communist Party's general secretary. Earlier this month, Trump said Hanoi would face a 20% tariff rate instead of 46% after a phone call with the Vietnamese leader.
It is the fourth tariff-related deal the U.S. president has announced after agreements with Vietnam, the U.K. and China.
The U.S. and Indonesia traded an estimated $38.3 billion in goods in 2024, according to the Office of the U.S. Trade Representative. America reported a $17.9 billion goods trade deficit with Indonesia that year. The main U.S. imports from the Southeast Asian nation include palm oil and other agricultural products, metals, textiles and footwear.
"This landmark Deal opens up Indonesia's ENTIRE MARKET to the United States for the first time in History," Trump wrote. "For the first time ever, our Ranchers, Farmers, and Fishermen will have Complete and Total Access to the Indonesian Market of over 280 million people."
As with most countries, Trump noted that any transshipment from a nation charged a higher tariff would be subject to the tariffs levied on the point of origin.
"Thank you to the People of Indonesia for your friendship and commitment to balancing our Trade Deficit. We will keep DELIVERING for the American People, and the People of Indonesia!" he said.
Later on Tuesday, Trump told an energy conference in Pennsylvania that he was interested in Indonesia's copper.
"Indonesia really has great copper. Very, very powerful copper," Trump said, while noting that he reached a "big" deal with the government. "We have full access to Indonesia."
Prabowo, in an Instagram post, described his call with Trump as "very good". " Together, we agreed and concluded to take trade relations between Indonesia and the United States into a new era of mutual benefit between our two great nations," he said.
He later told reporters that the impact of U.S. goods enjoying tariff-free entry was manageable. "What is important to me is that our workers are safe," he said.
Prabowo added that the new Boeing airplanes would be bought by Garuda Indonesia, the national flag-carrier. "I am determined to elevate Garuda Indonesia and for that we need new aircraft," he said.
In addition to the purchase of Boeing aircraft, Indonesia will also import fuel, liquified petroleum gas, wheat, soybeans, and other commodities from the U.S.
Shinta Kamdani, chairperson of the Indonesian Employers Association, said Indonesia should not regard Trump's announcement as the final deal on tariffs. "A number of our competitors in the region are still in the process of negotiating with the US government," she told Nikkei Asia. "Therefore, we need to keep a close watch on the final position of our competitors, which could change the constellation of regional competition."
Shinta added that most U.S. products already face tariffs of less than 5%. "In this case, we will see and explore the impact on a product-by-product basis from the results of the ongoing negotiations," she said.
Harry Su, managing director of research at Samuel Sekuritas Indonesia, described the deal as "probably almost OK" for the nation's exporters as competitors will face similar or higher tariffs.
"The big problem" is for U.S. products that can enter Indonesia's market with zero tariffs, he said, citing poultry and corn farming as sectors that will "perish as our production costs are much higher than in the U.S."
Su added that an additional issue is: "How will this new 'friendship' with the U.S. be perceived by China, our current closest trading partner and biggest investor in Indonesia? This is the elephant in the room."
Eddy Martono, the head of the Indonesian Palm Oil Association, described the deal as "very good" for Indonesia "because we have a surplus against the U.S., specifically for palm oil [where] our market share is 89%."
"Indonesia's palm oil exports to the U.S. have continued to increase over the last 5 years and in 2023 they reached 2.5 million metric tons, although they dropped slightly in 2024 to 2.2 million tons," he said. "I am sure that if we work on it seriously in the next two to three years, they can reach 3 million tons."
Other countries -- including Japan, which has sent its trade envoy to Washington seven times -- have been unable to secure deals. The White House has sent some countries letters unilaterally declaring future tariff rates from Aug. 1 if agreements are not reached.
Jon Lang, a senior director for economic security policy at geopolitical risk advisory firm APCO and a former White House official from Trump's first term, said the Indonesia deal will be a "canary in the coal mine" that gives other countries a read into how things are going to proceed.
"What I'm principally looking for is if there is a marked difference in how much those letters have been leveraged by Washington to extract or to improve the terms of the deal," Lang said.
Lang cited Trump's mention of copper and said the role of critical minerals may have been a factor in sealing the deal.
"Given the fact that there's a very heightened concern about the critical minerals sourcing and broader raw-material sourcing," agreements over such items could be a model moving forward, he said.
