Donald Trump just proclaimed a trade breakthrough with Indonesia. Under this new deal, the Southeast Asian nation now faces a steep 19% tariff on its exports to the U.S. Trump’s announcement this past weekend on Truth Social is the latest example of his continued attempts to upend existing international trade agreements. Just like this new deal, negotiated directly with Indonesian President Prabowo Subianto, this exemplifies Trump’s clear preference to directly negotiate with individual countries.
In its place, Trump just announced that Indonesia should now expect to pay a 19% tariff on its exports to the U.S. This is an exciting development, especially as Indonesia is the 24th largest trade partner of America. A record of more than $38 billion flowed in both directions between the two countries in 2024. The U.S. currently has a $17.9 billion trade deficit with Indonesia. This deal has become indispensable to the economic equilibrium of their bilateral trade.
“This is probably the biggest part of the deal,” Trump stated, emphasizing the tariff structure and access provisions. In his remarks, he claimed that Indonesia is granting access to its markets that the U.S. does not currently enjoy.
“We will pay no tariffs. So they are giving us access into Indonesia, which we never had.” – Donald Trump
Trump’s announcement fits a much wider pattern in his administration’s trade strategy. This includes initial agreements with other countries, most notably the United Kingdom and China. Only last week he threatened to slap new 32% duty on all imports from Indonesia. This frame is a welcome and surprising change from his previous outlook.
The announcement has received attention beyond its content, because of its timing. In his campaign platform, Trump pledged to send “letters of termination” to U.S. trading partners. These advance letters will list the new, final tariff rates that will apply as of August 1. This strategy is designed to create more predictable and transparent norms for global trade and tariffs.
In addition to the deal with Indonesia, Trump has brokered an agreement with Vietnam that includes a 20% tariff on Vietnamese imports. This deal met a very real skepticism from Vietnamese officials who were allegedly startled by Trump’s rosy characterization of the agreement. Seven days before the agreement was to be signed, as of July 10, the Vietnamese government hadn’t officially approved every aspect of the deal.
“I spoke to their really great president, very popular, very strong, smart, and we made the deal.” – Donald Trump
Howard Lutnick, the CEO of Cantor Fitzgerald, commented on the nature of these tariffs by stating, “No tariffs there. They pay tariffs here,” underscoring the reciprocal nature of these trade arrangements.
As these developments play out, how Indonesia should respond to Trump’s protectionist claims is still far from clear. It remains to be seen whether they will officially ratify the specifics of the trade agreement. The potential impacts of this deal, the world’s largest free-trade agreement, could be felt beyond its shores, influencing U.S.-Indonesia relations and trade dynamics across the globe.