By Natalie Sherman | BBC News
In a significant development for international trade, US President Donald Trump has struck a new tariff agreement with Indonesia, easing mounting tensions between the two countries.

The deal, announced by both Trump and Indonesian President Prabowo Subianto, will reduce tariffs on Indonesian goods from 32% to 19%. In return, the US will gain what Trump described as “full access” to Indonesian markets for American companies.

Speaking from Jakarta, President Prabowo called the agreement a “new era of mutual benefit” in US-Indonesia relations. He also acknowledged that Trump was a “tough negotiator”, adding that the two leaders had reached common ground after a direct phone call.

A Response to Rising Tariff Threats

The deal comes just weeks after the Trump administration reignited its aggressive tariff strategy, threatening high duties on a wide array of imports from countries around the globe. Letters sent to over a dozen governments warned of new tariffs set to begin on 1 August, sparking a rush of last-minute negotiations.

Indonesia was among the nations surprised by Trump’s warning, especially given recent signs of progress in trade talks. Officials were reportedly caught off guard by the threat of a 32% tariff—just days before an agreement was expected.

But according to Trump, a conversation with Prabowo led to a breakthrough. Indonesia, in return for lower tariffs on its exports, has agreed to reduce its own tariffs on US products, particularly agricultural goods and manufactured items long subject to high import duties.

Details of the Deal

“They’re going to pay 19%, and we’re going to pay nothing,” Trump stated confidently. “We will have full access into Indonesia.”

He also revealed that Indonesia has committed to:

• Purchasing $15 billion worth of American energy,
• Buying $4.5 billion in US agricultural products,
• Ordering 50 Boeing aircraft.

These commitments, while significant, are reportedly smaller than the figures mentioned in earlier drafts of the agreement, according to sources familiar with the negotiations.

Prabowo, while not confirming all the figures, acknowledged the scale of the deal. “We need planes, and they want to sell. Boeing is good—we’ll also work with Airbus,” he said. On energy and agricultural imports, he added: “We found common ground. We import fuel, wheat, soybeans… the deal makes sense.”

He also hinted that while zero tariffs on US goods might not be feasible, the terms were mutually acceptable. “We have our limits. We can’t afford more than this. But what matters most is that Indonesian workers are protected,” Prabowo said.

Broader Context and Expert Analysis

Indonesia is among the top 25 US trade partners, exporting nearly $28 billion worth of goods to the US last year, including palm oil, footwear, and electronics.

However, trade experts suggest that Indonesia’s gains may be more symbolic than economic. “The real value for Indonesia is political,” said Stephen Marks, economics professor at Pomona College. “It shows they can hold their own in negotiations with a powerful partner.”

This latest deal follows similar agreements between the US and the UK, China, and Vietnam. In each case, however, many of the US-imposed tariffs remain in place, with major issues still unresolved.

Everett Eissenstat, a former Trump economic adviser and now a partner at Squire Patton Boggs, predicts more deals will follow soon. But he noted a shift in attitude among America’s trade partners.

“The tone is different now,” he said. “Many countries are accepting tariff levels they would’ve rejected a year ago. But for most governments, being at the negotiating table is better than being left out.”