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In a major breakthrough for international trade, the United States and Indonesia have agreed in principle to waive tariffs on more than 99% of American products and remove non-tariff barriers to US business. In exchange, Washington will cut its proposed tariff on Indonesian goods to 19% from the earlier threatened 32%, both governments said on Tuesday.
Ex-President Donald Trump, who initially disclosed the agreement on July 15, endorsed the deal on his Truth Social site, labeling it a “huge win for our Automakers, Tech Companies, Workers, Farmers, Ranchers, and Manufacturers.”
A joint statement and White House fact sheet detailed the structure of the agreement, which is to be finalized in weeks ahead. The statement highlighted that the agreement would offer “unprecedented market access” for both countries’ exporters and enhance bilateral economic relations.
The deal places Indonesia, Southeast Asia’s biggest economy, in a group of a few countries to conclude a trade agreement with the US ahead of an August 1 deadline when higher tariffs would have kicked in. The 19% US tariff rate is now equal to that of the Philippines, with Vietnam’s slightly higher at 20%.
Under the agreement, Indonesia will abandon its planned tariffs on internet data transmissions and back extending a moratorium on e-commerce tariffs at the World Trade Organization (WTO). In addition, it will scrap newly imposed pre-shipment inspections and verifications for US shipments policies that had shut down American farm trade and increased the US farm trade deficit.
A US administration official, speaking on condition of anonymity, said the deal would restore a trade surplus in farm products and undo losses incurred from Indonesia’s past export restrictions.
In a stimulus to the US auto market, Indonesia has agreed to accept US Federal Motor Vehicle Safety Standards, opening the way for American automobile exports into its market of 280 million consumers.
In addition, Indonesia will suspend export bans on strategic industrial commodities, such as important minerals, and eliminate local content requirements on these products for exports to the US market.
The US will also identify industrially non-naturally occurring or domestically non-produced commodities for potential further reduction of tariffs. The two countries pledged to negotiate rules of origin in order to prevent third countries from taking advantage of the benefits of the agreement.
Indonesia also committed to eliminating restrictions on imports and licensing requirements on US remanufactured products and parts and to joining the Global Forum on Steel Excess Capacity, together addressing steel oversupply challenges.
