JAKARTA: Indonesia says it has reached a trade deal with the United States after an “extraordinary struggle” in negotiations which resulted in a reduction of proposed US tariff rates on the South-East Asian country’s exports to 19% from 32%.
US President Donald Trump said on Tuesday a deal had been struck after he spoke to Indonesian President Prabowo Subianto.
The deal is among only a handful reached so far by the Trump administration ahead of an Aug 1 deadline for negotiations.
“This is an extraordinary struggle by our negotiating team led by the Coordinating Minister for Economic Affairs,” Hasan Nasbi, the Indonesian president’s spokesperson, told reporters on Wednesday.
Hasan said Prabowo had also negotiated directly with Trump over the phone, without giving further details.
He said Prabowo would hold a press conference later on Wednesday after returning from a foreign trip.
Indonesia – the world’s fourth-largest country and a member of G20 – ran a goods trade surplus of US$17.9bil with the United States last year, according to US data.
Hasan called the deal a “meeting point” between the two governments, and said Indonesia’s tariff rate was much lower than other countries in South-East Asia.
Indonesia, South-East Asia’s largest economy, has committed to purchasing 50 Boeing jets, US$15bil in US energy, and US$4.5bil in US agricultural products as part of its trade agreement with the United States, Trump said.
Trump outlined an Indonesia deal similar to a preliminary pact struck recently with Vietnam, with a flat tariff on exports to the United States roughly double the current 10% and no levies on US exports to Indonesia.
It also included a penalty rate for so-called transshipments of goods from China via Indonesia.
Indonesia’s stock index rose as much as 0.7% on Wednesday after the deal, which some analysts said would provide a positive catalyst for economic activities.
“Well, 19% is better than 32%,” Matt Simpson, a senior analyst at City Index in Brisbane, said.
“Indonesian non-oil exports such as footwear and textiles will take a hit, but energy and agriculture are set to gain.
“Officials are of course pleased because they’re in Trump’s good books,” he added.
Natixis warned the Indonesian economy would still be affected by Trump’s tariffs on China – Indonesia’s biggest trade partner.
Myrdal Gunarto, an economist with Maybank Indonesia, described the deal as relatively good, as Jakarta is getting a tariff below those imposed on other South-East Asian neighbours. — The Jakarta Post/ANN
