TEMPO.CO, Jakarta - United States President Donald Trump has reduced import tariffs for products originating from Indonesia, from 32 percent to 19 percent. Trump decided after direct negotiations with President Prabowo Subianto.
"This morning, I finalized an important Deal with the Republic of Indonesia after speaking with the Highly Respected President Prabowo Subianto," Trump said in a post on the Truth Social social media on Tuesday, July 15, 2025, U.S. time.
So, what are the impacts of Trump's tariff reduction?
Increase in US Product Imports
The Executive Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira Adhinegara, believes that the reduction in import tariffs still harms Indonesia's position. In reciprocation for Trump's tariff reduction, U.S. exports to Indonesia will be free from tariffs and non-tariff barriers.
"The 19 percent tariff for Indonesian exports to the U.S., while the U.S. can enjoy a 0 percent facility, actually carries high risks for Indonesia's trade balance," Bhima told Tempo on Wednesday, July 16, 2025."
On one hand, according to him, the 19 percent tariff will benefit Indonesian-manufactured exports, such as footwear, finished clothing, crude palm oil (CPO), and rubber. On the other hand, he continued, imports of products from the U.S. will surge, especially for oil and gas commodities, electronic products, aircraft parts, cereals, and pharmaceutical products. As of 2024, the total imports of these five commodity products reached US$5.37 billion or around Rp87.3 trillion.
Local Businesses Face Significant Pressure
In line with this, Syafruddin Karimi, the Economist of Andalas University (Unand), believes that the U.S.-Indonesia trade agreement places Indonesia in an unbalanced position. "When imported goods become cheaper due to tariff exemptions, then local businesses will face significant pressure, and the space for national industrialization becomes narrower," said Syafruddin in his statement on Wednesday, July 16, 2025.
According to him, such an unequal condition could risk creating a bilateral trade deficit between Indonesia and the U.S. He mentioned that Indonesia has the potential to experience what is called a "two-tier balance", when global trade records a surplus overall, but experiences a deficit in trade relations between Indonesia and the U.S.
"Within the framework of this agreement, Indonesia appears more as a passive consumptive market, not an equal and sovereign trading partner," said Syafruddin.
As part of the agreement to reduce import tariffs, Trump mentioned that Indonesia is willing to buy 50 Boeing aircraft, most of which are Boeing 777. In addition, the Indonesian government is committed to importing energy commodities from the U.S. with a value reaching US$15 billion or around Rp240 trillion (assuming an exchange rate of Rp16,000 per U.S. dollar), and buying agricultural products made in the U.S. worth US$4.5 billion or around Rp72 trillion.
"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. US exports to Indonesia are to be from Tariff and Non-Tariff Barrier free," said Trump.
Anastasya Lavenia Yudi, Rafiif Nur Tahta Bagaskara, Ilona Estherina, and Krisna Pradipta contributed to the writing of this article
Editor's Choice: Deal Sealed: 19% Tariff for Indonesia as Trump Secures Purchase of 50 Boeing Jets
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