Indonesia yesterday said that it had reached a trade deal with the US after an “extraordinary struggle” in negotiations that resulted in a reduction of proposed US tariff rates on the Southeast Asian country’s exports to 19 percent from 32 percent.
US President Donald Trump on Tuesday said that 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,” Prabowo spokesman Hasan Nasbi told reporters yesterday.
Photo: EPA
Nasbi said that Prabowo had also negotiated directly with Trump over the phone, without giving further details.
Indonesia and the US have agreed to take trade relations into a new era, Prabowo wrote on Instagram after what he described as “a very good call” with Trump.
Indonesia — the world’s fourth-largest country by population and a member of G20 — last year had a goods trade surplus of US$17.9 billion with the US, US Trade Representative data showed.
Nasbi called the deal a “meeting point” between the two governments and said Indonesia’s tariff rate was much lower than other countries in Southeast Asia.
Indonesia, Southeast Asia’s largest economy, has committed to purchasing 50 Boeing jets, US$15 billion in US energy and US$4.5 billion of US agricultural products as part of the agreement, Trump said.
Trump outlined an Indonesia deal similar to a preliminary pact struck recently with Vietnam, with 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 percent yesterday after the deal, which some analysts said would provide a positive catalyst for economic activities.
“Well, 19 percent is better than 32 percent,” said Matt Simpson, a senior market analyst at City Index in Brisbane, Australia.
“Indonesian non-oil exports such as footwear and textiles will take a hit, but energy and agriculture are set to gain,” Simpson said. “Officials are of course pleased because they’re in Trump’s good books.”
Natixis warned that 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 Southeast Asian neighbors.
The deal “opens more space for domestic lower monetary policy rate,” Gunarto said, adding that he expected it to trigger capital inflows.
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