Indonesia Had to Work "Extra Hard" for US Deal

Indonesia has confirmed that securing a trade agreement with the United States required "extraordinary effort," which included a direct phone call between President Prabowo Subianto and Donald Trump.

Following President Trump's announcement on Tuesday (15th July) US time that a deal had been reached after his conversation with President Prabowo Subianto, Jakarta elaborated. 

On Wednesday (16th July) local time, Hasan Nasbi, spokesperson for the Indonesian President, stated that Indonesia sealed the trade agreement with the US after "extraordinary efforts" in negotiations led by the Coordinating Minister for Economic Affairs. 

These talks culminated in a significant reduction of tariffs from 32% to 19%. The spokesperson also confirmed the direct telephone negotiation between Prabowo and Trump. 

The Indonesian President is expected to make a public statement on the matter on Wednesday, following his return from abroad.

Prabowo himself described his phone call with Trump as "excellent," and he posted on Instagram that Indonesia and the United States had agreed to usher in a new era for their trade relations.
 

Indonesia, the world's fourth most populous nation and a G20 member, registered a trade surplus of $17.9 billion with the United States last year.

President Prabowo's spokesperson highlighted that the agreement signifies a "convergence" between the two governments, noting that Indonesia's new tariff rate is now considerably lower than many other Southeast Asian nations.

According to details shared by Trump, Indonesia, Southeast Asia's largest economy, has committed to purchasing 50 Boeing aircraft, $15 billion worth of US energy products, and $4.5 billion in agricultural goods. 

This agreement with Indonesia mirrors a deal made with Vietnam, meaning goods exported from the US to Indonesia will be tariff-free, while the US will impose higher tariffs on Chinese goods routed through Indonesia.
 

The news of the deal was well-received by the Indonesian stock market, which saw an uplift of up to 0.7% on Wednesday. Analysts generally view this agreement as a positive catalyst for economic activity.

Matt Simpson, a senior market analyst at City Index in Brisbane, commented to Reuters that a 19% tariff rate is "better than 32%." 

He suggested that while Indonesia's non-oil exports, such as footwear and textiles, might face some challenges, the energy and agricultural sectors are likely to benefit. 

"Authorities are pleased with this because they got good terms from Trump," Simpson added.

However, the investment bank Natixis cautioned that the Indonesian economy could still feel the repercussions of US tariffs on China, given that China remains Indonesia's largest trading partner.

Mirdal Gonarto, an economist at Maybank Indonesia, described the deal as "quite good," noting that Jakarta had secured a lower tariff rate than its neighbouring countries in Southeast Asia.

"The agreement paves the way for easier interest rate reductions," Gonarto said, anticipating that it would also stimulate capital inflows.