President Donald Trump and President Prabowo Subianto during the July 2025 trade deal announcement.
That Historic Moment of US Indonesia trade deal
First, let’s rewind a bit In July 2025, US President Donald Trump made a major announcement with Indonesian President Prabowo Subianto the framework of a “reciprocal trade agreement,” meaning both countries would reduce tariffs on each other’s goods. Trump called it a “major victory for American farmers and industry Furthermore, in April 2025, Trump issued an executive order that called for reciprocal tariffs of up to 32% on several countries. Indonesia was also on the list. However, negotiations continued until July The result was then posted by Trump on social media on July 15th.
He said, “Indonesia opened the door for our exports, but American farmers will now be able to sell billions of dollars worth of goods, and Indonesia also expressed its happiness Prabowo said this will strengthen our economic relationship” The White House released a joint statement on July 22nd It stated that it would build on the 1996 Trade and Investment Framework Agreement, and the two countries were supposed to sign a final agreement by August. But now, in December 2025, everything has been reversed.
What were the main terms of the agreement agreed upon?
Now, let’s get to the details The joint statement clearly stated that Indonesia would remove 99% of tariffs on US goods. This would apply to industrial products, food, and agricultural goods, excluding, for example, US meat, dairy products, fruits and vegetables, and certain cultural products like pork or wine On the other hand, the US reduced tariffs on Indonesian goods from 32% to 19%, but this would benefit electronics, clothing, footwear, and palm oil.
It also promised to remove non-tariff barriers. This means Indonesia will allow US companies easier access to the market, with a special focus on digital trade Indonesia called for the elimination of tariffs on digital products that supported cross-border data transfers, then vetoed a promise to make the moratorium on digital customs duties permanent American tech companies like Google and Microsoft benefited, and there were also purchase commitments. Indonesia will buy $15 billion worth of American energy goods, $4.5 billion worth of agricultural products, and 50 Boeing aircraft Trump called it “full access,” but now, all of this is at risk.
Indonesia’s Compulsions on US Indonesia trade deal
The question now is why Indonesia is backing down. The news isn’t clear. But experts speculate that internal politics, as Prabowo was elected in October 2024, is a new government Local industries, such as nickel mining, may be putting pressure on the government Indonesia wants to impose a raw material export ban, but the US wants to ensure Indonesia remains at the bottom of the value chain.
A report by the Transnational Institute suggests this deal could put Indonesia in a “raw material export trap They want to become a global player in batteries and semiconductors Despite this, tariff cuts will allow US companies to enter. Local farmers and manufacturers fear the global economy Another reason is that inflation will rise in 2025 Indonesia’s current account deficit is also causing them to want protectionism. Brazil was taken action against by US Trade Rep 301 in an investigation Indonesia may be fearful that they will be next.
US Anger: Trump Administration’s Response
US Anger: US Trade Rep Jameson Greer said Indonesia was backtracking, and according to Reuters, Washington was frustrated, but he believed Jakarta was shying away from binding commitments Trump remained silent for now. However, his style suggests a tweet could be imminent In July, he called Prabowo a “great partner,” and perhaps the tariffs would be reduced to 32% The American Farmers Association praised it in July. Now they’re worried. Soybean exports will be affected, but there’s also turmoil in Congress Representative Kevin Hearn said, “This was an opportunity to remove digital barriers Now everything has been reversed.” Third, geopolitics: Indonesia is closer to China, while the US wants to increase its influence in Southeast Asia. Prabowo wants to maintain balance The Financial Times says this is extremely problematic. Indonesia could lose the deal.
What the collapse of the US–Indonesia trade deal means for exports
Let’s look at the figures In 2024, US-Indonesia trade was $400 billion, US exports $200 billion If the deal breaks down, there will be losses for the US farmers will be affected Indonesia is a major buyer of soybeans. In 2025, $10 billion worth of exports will be halted, along with manufacturing. Boeing’s order for 50 planes will be cancelled A loss of $15 billion in the energy sector.
Furthermore, for Indonesia:- US tariffs will increase from 19% to 32%. Their exports, such as palm oil and electronics, will become more expensive 2025 GDP growth will decline from 5% to 4%, which will put local jobs at risk. However, some sectors may survive, for example, Mining continues to export raw materials, impacting global supply chains Indonesian nickel suppliers are affected by electric vehicle batteries. The US lags behind in chips and tech, which experts say signals a trade war Trump’s America First policy strengthens China in Asia.
US political reaction to the US–Indonesia trade deal reversal
Trump’s second term He built his image through trade deals, and the July deal was a victory for him. Now, failures have tarnished his image With Prabowo as the new leader, he has retreated to nationalist local support, as well as to South- In East Asia, ASEAN countries are watching, so if Indonesia bows, they will too But if it stands firm, protectionism will increase.
Also, what do experts say? Experts who are experts in modern diplomacy say that this backtracking geopolitical shift Indonesia with China Balance Transnational Institute The deal is harmful to Indonesia down the value chain, which from the US side, focuses on Cassidy Levy Rules of Origin, then stopping transshipment.” But now everything is uncertain as to what the future prospects will be The next step is still under discussion When Greer and Indonesian ministers meet, it is possible that some commitments can be reframed But if not, tariffs will increase Complaint in veto.
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