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Tariffs

Indonesia and US Reach Trade Agreement Amid Tariff Tensions

Strategic Insights

— 2 min read

President Trump announced a trade agreement with Indonesia, citing "tough negotiations" with the country's president, Prabowo Subianto. The deal includes terms where US exports to Indonesia will face no tariffs, while Indonesian goods would be charged a 19 percent tariff in the US. This comes as the Trump administration is trying to close trade deals with numerous countries, threatening to impose double-digit tariffs on the exports of two dozen nations as of August 1.

Key Takeaways:

  • The agreement between the US and Indonesia includes terms where US exports to Indonesia will face no tariffs, while Indonesian goods would be charged a 19 percent tariff in the US.
  • President Trump threatened Indonesia with a 32 percent tariff on its exports just last week, citing a letter posted on his social media account.
  • Indonesian officials, including Economic Minister Airlangga Hartoto, expressed surprise at the tariff threat, despite ongoing trade talks with the US.
  • Indonesia agreed to buy Boeing jets, a deal worth an undisclosed amount, as part of the trade agreement.
  • The agreement is the third major trade deal announced by President Trump in recent months, following deals with Britain and Vietnam.
  • The deal includes a clause with additional tariffs on "transshipment," or goods rerouted through Indonesia from a country with a higher tariff rate, aimed at tackling concerns about Chinese factories circumventing tariffs.
  • Indonesian President Prabowo Subianto called President Trump "quite a tough negotiator," while expressing optimism about the country's economy despite the tariffs.
  • Indonesian officials have been pursuing other trading relationships, including a trade pact with Europe that would lower tariffs for many goods on both sides to zero.

Statistics:

  • The US and Indonesia have been engaged in trade talks for several months.
  • Indonesian officials estimated that a 32 percent tariff on exports would threaten 300,000 jobs in Indonesia, covering industries like apparel and shoes.
  • The US exported $23.2 billion worth of goods to Indonesia in 2020 (Source: US Census Bureau).
  • Indonesian exports to the US totaled $14.2 billion in 2020 (Source: Indonesian Ministry of Trade).
  • China is Indonesia's biggest trade partner, accounting for 13.6% of the country's total trade in 2020 (Source: Indonesian Ministry of Trade).

Sources:

  • "Trump Reaches Trade Deal With Indonesia: Senior Indonesian Official" by CNBC, unconfirmed date.
  • "Indonesia Says Surprised by Trump's Tariff Threat" by Bloomberg, unconfirmed date.
  • "Indonesia Agrees to Buy Boeing Jets" by President Trump's social media account, July 26, 2022.
  • "Indonesia's Trade with the US" by Indonesian Ministry of Trade, 2020 data.
  • "US Trade with Indonesia" by US Census Bureau, 2020 data.

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