Trump announces new trade deal with Indonesia and cuts tariff

Only Indonesia, the UK and Vietnam have announced trade deals with US ahead of August 1 deadline

Indonesia’s Directorate General of Customs and Excise in Jakarta. The country has struck a 'significant' trade deal with the US. AFP

US President Donald Trump announced a trade deal with Indonesia on Tuesday, saying it agreed to pay a 19 per cent tariff on its exports and pledged to buy American goods.

In a post on his Truth Social platform, Mr Trump said Indonesia would supply the US with critical minerals and planned to purchase Boeing aircraft and farming products.

“This Deal is a huge win for our automakers, tech companies, workers, farmers, ranchers and manufacturers,” Mr Trump wrote.

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The deal comes as Indonesia was facing a 32 per cent tariff on exports to the US, starting from August 1. US officials said the agreement ensured some tariffs remained on Indonesia, which has a population of about 280 million.

“The deal is significant,” one official told journalists on a call. “It opens new markets for us, exports, reaffirms US digital leadership and it eliminates non-tariff barriers on US exports.”

The official added that Indonesia would drop its tariffs “to zero on over 99 per cent of its trade” with the US and would also eliminate all non-tariff barriers.

The deal solidifies Mr Trump’s strategy of using the threat of high tariff rates to extract concessions from trade partners under his America First approach. It may serve as a blueprint for agreements with other nations.

He also announced a new 19 per cent tariff rate for goods from the Philippines, the country's President Ferdinand Marcos Jr visited the White House.

“It was a beautiful visit and we concluded our trade deal, whereby the Philippines is going open market with the United States, and zero tariffs. The Philippines will pay a 19 per cent tariff,” Mr Trump said. He called Mr Marcos a “very good and tough negotiator".

US President Donald Trump and Philippines President Ferdinand Marcos Jr. Bloomberg

In April, Mr Trump announced a blanket 10 per cent tariff on almost all trading partners, while imposing higher levies on other countries with trade deficits.

Mr Trump, who took office in January, had framed his so-called reciprocal tariff policy as a way to reduce deficits the US has with its trading partners.

The US official said the agreement with Indonesia was worth at least $50 billion to the country in new market access, as well as purchases by Indonesian companies, including liquefied natural gas and farm commodities.

The US had a goods trade deficit of $17.9 billion with the country last year, according to the Office of the US Trade Representative. That was a 5.4 per cent increase from 2023.

While US exports to Indonesia increased by 3.7 per cent to $10.2 billion last year, imports rose by 4.8 per cent.

Mr Trump's efforts to reformat US trade has also come with great uncertainty and course reversals. The President said he would quickly reach trade deals with nations, but only Indonesia, the UK and Vietnam have announced agreements. Mr Trump has secured a “trade truce” with China, which has a separate deadline.

Earlier this month, trade letters went out to more than a dozen countries, with threats of tariff rates ranging from 20 to 50 per cent.