The US-Indonesia trade deal is drawing praise from Indonesian officials, with Luhut Binsar Pandjaitan, Chair of the National Economic Council (DEN), calling it a major win for the country. The deal reduces U.S. tariffs on Indonesian exports from 32% to 19%, making them the lowest among ASEAN countries with a trade surplus with the United States.
Luhut emphasized the long-term strategic value of the agreement. “We are not rolling out the red carpet for outsiders; we are instead opening wider pathways for Indonesian products and businesses to compete in global markets. This is economic diplomacy with a clear long-term vision rooted in national interest,” he stated in a press release on July 17, 2025, as reported by CNBC Indonesia.
Luhut Endorses US-Indonesia Trade Deal
Luhut has firmly supported the tariff reduction as a move to reinforce Indonesia’s position in global trade. He described the decision to lower tariffs as a reciprocal and calculated policy that benefits both countries.
According to Luhut, Indonesia also simplified tariffs on most U.S. import products to complement the deal. He made it clear that this was not a one-sided concession but a strategic opportunity. “This policy is not a one-sided concession, but rather a strategy to open investment opportunities, encourage technology transfers, and expand Indonesia’s export market access more competitively,” he explained.
Indonesia Secures ASEAN’s Lowest Tariffs
Indonesia now enjoys the lowest additional U.S. tariff rate among ASEAN countries and other nations with a U.S. trade surplus. This advantage positions the country to compete more effectively in the U.S. market.
“Indonesia is now the country with the lowest additional U.S. tariffs among those with a trade surplus with the U.S., and also compared to other ASEAN countries. This clearly presents a great opportunity for Indonesia,” Luhut said.
Lower tariffs reduce the cost barrier for Indonesian exports, making products more attractive to U.S. buyers. This increased market access could lead to a rise in export volume, especially in sectors with strong U.S. demand.
Economic Projections Show Positive Impact
DEN conducted simulations to assess the potential economic impact of the tariff reduction. The results were promising. With tariffs lowered to 19%, Indonesia’s Gross Domestic Product (GDP) is expected to rise by 0.5%.
The simulations also predict a 1.3% increase in employment and a 0.6% improvement in public welfare. Investment could surge by as much as 1.6%, signaling increased confidence in Indonesia’s market.
These projections highlight the multiplier effect of trade policy on domestic economic indicators. They also reinforce the importance of reciprocal agreements in driving growth.
Expert Warns of Trade-Offs and Overreliance on U.S. Market
Despite the optimistic projections, some experts urge caution regarding the US-Indonesia trade deal. Bhima Yudhistira, Executive Director of the Center of Economic and Law Studies (Celios), warns that the deal may still disadvantage Indonesia overall.
He acknowledges the tariff reduction from 32% to 19%, but notes Indonesia must still pay a 0.1% import duty on its imported goods. As cited by CNN Indonesia, Bhima explained, “This facility could impact the trade balance deficit, reduce state revenue from import duties, and potentially hurt local businesses, especially in the energy and food sectors.”
Bhima advises the government not to rely too heavily on the U.S. market. He encourages expanding trade access to Europe and strengthening cooperation within ASEAN. “It’s better to push for market access to Europe as a form of market diversification, and also encourage cross-ASEAN trade,” he said.
This warning highlights the importance of diversifying export markets to reduce dependence and protect Indonesia’s economic stability.
Read More: Indonesia Export Tariffs Set at 19% in US Deal – Benefit or Burden?
Strategic Path to Long-Term Competitiveness
The US-Indonesia trade deal not only opens doors for broader economic reforms but also directly benefits key labor-intensive sectors. Industries like textiles, garments, footwear, furniture, and fisheries stand to gain from improved access to the U.S. market. This access could encourage global companies to relocate production to Indonesia, creating jobs and strengthening the country’s industrial base.
Luhut and the National Economic Council view the deal as a stepping stone to accelerate deregulation and lower domestic logistics and production costs. These efforts aim to tackle Indonesia’s high-cost economy and boost overall competitiveness.
By linking sectoral growth to wider economic reforms, Indonesia positions itself to attract more investment, expand exports, and build a resilient economy for the future.
Balancing Opportunity with Strategic Diversification
The US-Indonesia trade deal offers clear benefits, including ASEAN’s lowest U.S. tariffs and promising economic growth projections. Supported by Luhut and the National Economic Council, the agreement aims to boost exports, attract investment, and strengthen Indonesia’s competitiveness.
However, expert voices like Bhima Yudhistira remind us that risks remain. Potential trade deficits, revenue losses, and local business challenges suggest the deal’s gains may not be uniform. Diversifying markets beyond the U.S., especially toward Europe and ASEAN, remains critical.
As Indonesia moves forward, balancing this trade opportunity with strategic diversification will be key. Careful implementation and cross-sector coordination will determine whether the deal delivers sustainable and inclusive growth for the nation.
Source: cnbcindonesia.com, cnnindonesia.com
Image: ANTARA FOTO/Aditya Pradana Putra/Spt.
