In a bold move, on July 16, Indonesia secured a trade deal with the US that, at first glance, looks like a lifeline — locking in a maximum 19% tariff on Indonesian exports to the US through 2029. The deal arrives at a time of intensifying US protectionism and offers what appears to be a temporary shield.
But while the Indonesian government deserves credit for navigating an increasingly unpredictable global trade landscape, the devil, as always, is in the details. While the US holds Indonesia’s offer, what it puts on the table is little more than a token rollback of Trump’s unilateral tariffs — highly conditional and tied to his ever-expanding wish list.
Certainty — but at what costs? Indonesia’s government has presented this as a pragmatic step — offering tariff certainty in the face of the US’ recent unilateral tariff escalations. Under the new deal, the US guarantees that Indonesian goods will not face tariffs exceeding 19% for at least during Donald Trump’s term in office — should he stay in the office after the midterm election in November 2026. For a developing economy vulnerable to trade shocks, any degree of predictability is valuable. The deal may protect Indonesia from the kind of ad hoc tariff spikes Washington has recently imposed on China and other economies.
But certainty should not be confused with favourability. Trump’s tariffs of up to 19% remain a heavy burden. Indeed, Indonesia’s inclusion under this ceiling is a defensive concession, not an offensive achievement. It’s the lesser loss, not a win.
Understanding What’s at Stake.
Government officials argue that while the US only accounts for around 9.9% of Indonesia’s total exports, the trade relationship is disproportionately important due to the labour-intensive nature of the goods involved. Indonesian exports to the US — including apparel, footwear, furniture, rubber products and electronics — support a substantial number of jobs across Java, Sumatra and other regions.
Yet, looking at 2024 trade data, Indonesia’s top exports to the US remain concentrated in sectors that are particularly vulnerable to Washington’s protectionist impulses. Palm oil (HS-1511) accounts for 4.9% of Indonesia’s total exports to the US, followed by footwear (HS-6403) at 4.7%, electrical machines and apparatus (HS-8543) at 3.9%, telephone sets (HS-8517) at 3.4% and rubber tyres (HS-4011) at 3.0%. These industries are precisely the ones most exposed to tariff hikes and scrutiny — especially if they incorporate inputs from China, now a primary target of US trade restrictions.
Unanswered Questions.
Here lies the first major uncertainty: does the 19% cap apply uniformly to all Indonesian exports, or are some products — particularly those containing Chinese inputs — still subject to steeper duties?
The US has announced a complex, tiered tariff regime: 25% on labour-intensive goods such as textiles and footwear — key sectors for Indonesia; 40% on goods suspected of transshipment or Chinese-origin content; 50% on so-called “strategic sectors” including Aluminium, Copper, Semiconductors and Pharmaceuticals; and certain percentages through anti-dumping measures.
On top of these, an additional 10% levy applies to exports from BRIC countries, of which Indonesia is a member. Layered on top are anti-dumping duties — often steep, inconsistently applied and politically driven. Together, these measures deepen uncertainty for exporters while landing hardest on US importers and consumers.
The Indonesian government must demand full clarity: are all its exports genuinely shielded from these punitive classifications, or is the real cost of the deal still hidden in the fine print? If Indonesia remains vulnerable to these sector-specific penalties, then the much-publicised 19% ceiling becomes largely symbolic.
The Price of Being a US Friend.
Another concern is the scale of Indonesia’s political and financial commitments to seal this deal. Jakarta has reportedly agreed to purchase 50 Boeing aircraft, commit $15 billion in US energy imports (nearly 40% of Indonesia’s total energy imports), and import $4.5 billion worth of American agricultural products. Plus, there appears to be an undisclosed deal on copper — a sector Trump has repeatedly spotlighted.
One simple illustration: a single Boeing aircraft can cost around $400 million — more than IDR 6.5 trillion. These commitments inevitably raise pressing questions: How will the purchases be financed, and under what terms? What are the specifications, unit costs and delivery timelines? Who will oversee procurement, and how will transparency be ensured? Most crucially, are these transactions commercially sound — or merely political gestures with economic consequences?
Moreover, consider Boeing, which has faced a string of quality and safety scandals in recent years. Are Indonesia’s airlines prepared to absorb the risks — or the costs — of sidelining Airbus or domestic alternatives under diplomatic pressure? Likewise, bulk agricultural imports from the US could flood Indonesia’s market undercut local farmers, and risk breaching commitments under ASEAN and other trade agreements. What appears as cooperation may, in practice, impose steep economic and political trade-offs.
Pressure from All Sides.
The deal must also be viewed through a broader global trade lens. Indonesia has already concluded comprehensive trade agreements with major partners, including Australia, China, India, Japan, Korea and New Zealand; is close to finalising one with the EU; and has recently launched negotiations with the United Arab Emirates. These partners may now demand comparable market access — or question Indonesia’s commitment to fair competition — if US firms are granted preferential treatment and zero-tariff access through Trump’s intimidation tactics and transactional approach.
At the same time, the agreement risks eroding Indonesia’s carefully maintained strategic neutrality. Jakarta has long sought to balance its relations between Washington and Beijing, but this deal could be seen as a shift toward the US — a move that may carry geopolitical consequences. Caught between competing spheres of influence, Indonesia could soon face mounting pressure from both sides to demonstrate its allegiance.
A Deal — But Not a Strategy.
In sum, while the government deserves recognition for proactively securing trade assurances, this deal is, at best, a tactical move. It lacks the structural depth of mutual benefits. It is a stopgap — offering short-term relief but risking long-term costs without transparency, safeguards and strategy. Without clarity and sustainability, the Indonesia–US deal may become a costly symbol of alignment with little lasting value.
Indonesia must now take three critical steps to ensure this deal serves its national interest. It must demand clarity from Washington on the scope and depth of the 19% tariff cap — specifically whether all Indonesian exports are truly covered or selectively excluded under broader US tariff schemes. The government should also publish full details of its procurement commitments, particularly the purchase of Boeing aircraft, US agricultural products and energy imports. Transparency is essential to assess the financial implications and strategic value of these deals.
Most importantly, Indonesia must reaffirm its long-term trade strategy — one anchored in diversification, rules-based agreements and regional leadership — to avoid overdependence on any single partner and to preserve its autonomy in an increasingly polarized global economy.
Only then can Indonesia ensure that a handshake in Washington will not become a handcuff at home. As US diplomat Henry Kissinger famously quipped — a line that resonates with particular force under the Trump administration — “It may be dangerous to be America’s enemy, but to be America’s friend is fatal”.
Lili Yan Ing is secretary general of the International Economic Association (IEA). Yessi Vadila is a research fellow at the Wiratama Institute. The views and opinions expressed are their own.
