By: Bagus Pratama )*
The Indonesian government has achieved significant economic diplomacy through a tariff agreement with the United States. President Prabowo Subianto believes that the current 19 percent tariff on Indonesian imports to the United States is the result of long and difficult negotiations between Jakarta and Washington.
The reduction in reciprocal tariffs from the previous 32 percent to just 19 percent was successfully reduced, according to the Head of State, as the best possible agreement, considering that the United States itself has also demanded that Indonesia be able to open the door to imports of energy, agricultural products, and aircraft without tariff barriers.
President Prabowo explained that he had held an intensive telephone meeting with US President Donald Trump to align perceptions between the two parties and also ensure that the interests of all Indonesians would remain the top priority in the discussions.
The eighth Indonesian president acknowledged that Donald Trump himself is a tough negotiator, so his willingness to lower tariffs to just 19 percent was certainly a commendable achievement. He emphasized that the government had calculated all the consequences of the agreement to ensure worker protection and the sustainability of national industry.
He is optimistic that Indonesia’s economic foundations remain strong even though the trade deal significantly benefits the US through tariff exemptions for its products entering Indonesia.
Trade Minister Budi Santoso assessed that the United States’ 19 percent tariff policy is the lowest compared to other ASEAN countries. According to him, this is clear evidence of the success of the Indonesian government’s negotiations under President Prabowo Subianto.
He mentioned two main benefits of imposing the tariff, namely increasing the competitiveness of Indonesian goods exports to the American market and attracting foreign investment into the country.
Budi emphasized that export opportunities to the United States are increasing with this policy because Indonesian products have more competitive prices compared to other countries in the region.
Budi also emphasized that before Trump’s policy was implemented, all countries were subject to the same tariffs when exporting goods to the United States. However, tariffs are now set differently for each country, making Indonesia’s position more strategic due to its lower tariffs. According to Budi, this tariff advantage will attract more foreign investment to Indonesia, establishing it as a production base for export goods to the American market.
In addition to the tariff agreement with the US, Budi also stated that the Indonesian government has finalized an agreement with the European Union on the Comprehensive Economic Partnership Agreement (IEU-CEPA), which is believed to boost the value of Indonesian exports to the European market. He emphasized that with the opening of European and US markets, national exports will experience a significant increase in the near future.
Ronny P. Sasmita, a senior analyst at the Indonesia Strategic and Economic Action Institution, also expressed a similar view regarding the tariff agreement. According to Ronny, although the tariff on Indonesian goods to the United States is set at 19 percent, while US goods enter Indonesia tariff-free, the agreement remains fair within the framework of global geopolitical policy.
Ronny explained that international trade policy cannot be measured solely by tariff figures because it is always closely related to geopolitical policies and the comparative advantages of each country.
In the context of this agreement, Ronny believes that Indonesia still benefits because imported products such as Boeing aircraft, energy, and wheat cannot be produced by Indonesia itself.
Ronny explained that the zero percent tariff on Boeing imports would be very beneficial for Indonesian airlines because the purchase price of the aircraft would be much cheaper than before.
Similarly, imports of energy and agricultural products, such as wheat, have long been purchased from the United States, Russia, and Ukraine. He believes that eliminating import tariffs on these commodities will lower domestic production costs and increase consumer purchasing power.
Ronny emphasized that the reciprocal theory of international trade doesn’t necessarily mean two countries must impose the same tariffs on each other. Each country will adjust its policies based on the benefits it gains and the risks its economy can bear.
In the context of the tariff agreement with the United States, Ronny assessed that the policy taken by the Indonesian government was appropriate because it was able to maintain national economic stability while maintaining good relations with the superpower.
President Donald Trump’s 19 percent tariff agreement on Indonesian exports reflects the United States’ confidence in the competitiveness of Indonesian products. The policy also confirms that under President Prabowo Subianto’s leadership, the government has successfully conducted careful international trade negotiations, positioning Indonesia strategically as a major trading partner in Southeast Asia.
The lowest tariffs among ASEAN countries demonstrate that Indonesia’s economic diplomacy focuses not only on increasing export value but also on strengthening its bargaining position with developed nations. (*)
)*Macroeconomic Analyst – Nusantara Economic Research Institute