In July, the US and Indonesia announced a sweeping trade deal under which Indonesia would eliminate tariffs on more than 99% of US goods and scrap non-tariff barriers, while the US would reduce proposed tariffs on Indonesian products from 32% to 19%. Washington presented it as a major economic win, but US officials now say Jakarta is walking back key commitments, especially around binding rules and non-tariff barriers.
Why It Matters
The deal was meant to reset one of Southeast Asia’s most important trade relationships and strengthen the US position in the region’s economic landscape. If it collapses, it could disrupt planned investments, unsettle markets, weaken US strategic influence, and signal that Indonesia is unwilling to commit to the same standards recently agreed to by Malaysia and Cambodia.
The US Trade Representative and Treasury officials are pressing Indonesia to stick to the July terms, while Indonesia’s Ministry for Economic Affairs, led by Airlangga Hartarto, insists negotiations are still normal. American exporters from automakers to farmers are watching closely, as are Indonesian industries that expected tariff relief on their products.
What’s Next
Talks will continue, but the gap between the two sides is widening. If Indonesia refuses binding commitments, the US may withdraw concessions or reinstate higher tariffs. Jakarta says only “harmonisation of language” is needed, but Washington sees deeper backtracking. The coming weeks will determine whether the deal survives or unravels.
With information from Reuters.
