(Jakarta, 24th) Indonesia’s chief negotiator and Coordinating Minister for Economic Affairs, Airlangga, said that after meeting with US Trade Representative Greer, both sides have reached consensus on all substantive issues in the tariff negotiations and are expected to sign an agreement by the end of January next year.
At an online press conference on Tuesday (December 23), Airlangga said that his meeting with Greer in Washington on Monday marked smooth progress in the latest round of talks.
He said that the US agreed to exempt key Indonesian products such as palm oil, cocoa, coffee, and tea from tariffs; in exchange, the US will gain increased access to key Indonesian mineral resources. “The most important thing is to provide balanced market access for US products, while also ensuring that Indonesian products can enter the US market.”
The content of the draft agreement is basically consistent with the framework reached between the two countries’ leaders in July. According to the agreement at that time, Indonesia will remove tariffs on more than 99% of US goods and eliminate non-tariff barriers in exchange for the US reducing tariffs on Indonesian goods from the previously threatened 32% to 19%. Indonesia also agreed to purchase about $19 billion (approximately RM77.5 billion) worth of American goods, including 50 Boeing planes and agricultural products.
According to a statement from Airlangga’s office, the agreement to be signed between the two countries will also cover cooperation in digital trade, technology, and national security, but no further details were provided.
Airlangga also said that there are no clauses in the agreement that would restrict Indonesia from entering into trade agreements with other countries. “This agreement is both commercial and strategic in nature, and will benefit the economic interests of both countries in a balanced manner.”
Earlier this month, the US had accused Indonesia of reneging on previous commitments, and negotiations between the two sides were at risk of breaking down at one point. However, Airlangga pointed out that the “interaction model” between both sides is normal, and it is only necessary to coordinate on technical issues such as wording.
Technical teams from both sides will meet again in mid-January next year to finalize the text of the agreement. Indonesian President Prabowo and US President Trump are expected to meet at the end of January next year, at which time it is expected that the trade agreement will be signed.
Airlangga remains optimistic, saying even if the agreement is not signed in January, the US will not raise tariffs back to 32%, as all content in the draft agreement has already been agreed upon by both parties.
After news of the trade agreement draft was released, the Indonesian rupiah and government bond yields remained largely unchanged, while the Indonesian stock market fell by 0.3% on Tuesday. The rupiah has been the second worst-performing currency in Asia this year, having depreciated by 4%.
Analysts note that this news should remove a major uncertainty weighing on the rupiah’s exchange rate, but for the Indonesian currency to achieve a substantial recovery, improvements in domestic economic growth, fiscal conditions, and the return of foreign investment are needed.
Although the agreement draft between the two countries appears to be good news for the Indonesian market, the burden-sharing policy of US tariffs has already caused major difficulties for exporters, and with the government raising minimum wages, Indonesian enterprises may have to bear more costs next year.
Bob Azam, Head of Human Resources at the Indonesian Employers Association (APINDO), revealed that buyers have consistently pressured Indonesian companies exporting to the US to shoulder part of the tariff burden.
In addition, under new Indonesian regulations, labor wages may rise by 5% to 7% next year. This means Indonesian companies will not only have to deal with tariff-related expenditures, but will also face higher labor costs.
Azam said some companies are already running at a loss, and many businesses are struggling to meet this year’s wage standards. “That’s why companies are in a dilemma.”
At an online press conference on Tuesday (December 23), Airlangga said that his meeting with Greer in Washington on Monday marked smooth progress in the latest round of talks.
He said that the US agreed to exempt key Indonesian products such as palm oil, cocoa, coffee, and tea from tariffs; in exchange, the US will gain increased access to key Indonesian mineral resources. “The most important thing is to provide balanced market access for US products, while also ensuring that Indonesian products can enter the US market.”
The content of the draft agreement is basically consistent with the framework reached between the two countries’ leaders in July. According to the agreement at that time, Indonesia will remove tariffs on more than 99% of US goods and eliminate non-tariff barriers in exchange for the US reducing tariffs on Indonesian goods from the previously threatened 32% to 19%. Indonesia also agreed to purchase about $19 billion (approximately RM77.5 billion) worth of American goods, including 50 Boeing planes and agricultural products.
Airlangga also said that there are no clauses in the agreement that would restrict Indonesia from entering into trade agreements with other countries. “This agreement is both commercial and strategic in nature, and will benefit the economic interests of both countries in a balanced manner.”
Earlier this month, the US had accused Indonesia of reneging on previous commitments, and negotiations between the two sides were at risk of breaking down at one point. However, Airlangga pointed out that the “interaction model” between both sides is normal, and it is only necessary to coordinate on technical issues such as wording.
Technical teams from both sides will meet again in mid-January next year to finalize the text of the agreement. Indonesian President Prabowo and US President Trump are expected to meet at the end of January next year, at which time it is expected that the trade agreement will be signed.
Airlangga remains optimistic, saying even if the agreement is not signed in January, the US will not raise tariffs back to 32%, as all content in the draft agreement has already been agreed upon by both parties.
After news of the trade agreement draft was released, the Indonesian rupiah and government bond yields remained largely unchanged, while the Indonesian stock market fell by 0.3% on Tuesday. The rupiah has been the second worst-performing currency in Asia this year, having depreciated by 4%.
Analysts note that this news should remove a major uncertainty weighing on the rupiah’s exchange rate, but for the Indonesian currency to achieve a substantial recovery, improvements in domestic economic growth, fiscal conditions, and the return of foreign investment are needed.
Although the agreement draft between the two countries appears to be good news for the Indonesian market, the burden-sharing policy of US tariffs has already caused major difficulties for exporters, and with the government raising minimum wages, Indonesian enterprises may have to bear more costs next year.
Bob Azam, Head of Human Resources at the Indonesian Employers Association (APINDO), revealed that buyers have consistently pressured Indonesian companies exporting to the US to shoulder part of the tariff burden.
In addition, under new Indonesian regulations, labor wages may rise by 5% to 7% next year. This means Indonesian companies will not only have to deal with tariff-related expenditures, but will also face higher labor costs.
Azam said some companies are already running at a loss, and many businesses are struggling to meet this year’s wage standards. “That’s why companies are in a dilemma.”