U.S. And Indonesia Finalize Trade Deal, Reducing Tariffs and Boosting Investment
Washington, D.C. – The United States and Indonesia have finalized a landmark trade agreement aimed at boosting economic ties and expanding market access for both countries. The agreement, signed on February 19, 2026, by President Donald J. Trump and Indonesian President Prabowo Subianto, will significantly reduce tariffs and promote investment in key sectors.
Key Terms of the Agreement
The U.S.-Indonesia Agreement on Reciprocal Trade includes several key provisions:
- Tariff Elimination: Indonesia will eliminate tariff barriers on over 99% of U.S. Products exported to Indonesia, encompassing agricultural goods, health products, seafood, information and communication technology, automotive products, and chemicals.
- Non-Tariff Barrier Reduction: Indonesia will address non-tariff barriers, including exempting U.S. Companies and goods from local content requirements, accepting U.S. Federal motor vehicle safety and emission standards, and adopting FDA standards for medical devices and pharmaceuticals.
- Agricultural Market Access: Indonesia will address barriers to U.S. Agricultural products by exempting food and agricultural products from import licensing regimes and ensuring transparency in geographical indications.
- Digital Trade: Indonesia has committed to eliminating tariffs on “intangible products” and supporting a permanent moratorium on customs duties on electronic transmissions at the World Trade Organization.
Reciprocal Tariffs and Investment Commitments
Under the agreement, exports from Indonesia to the U.S. Will be subject to a reciprocal tariff of 19%, with certain products receiving a 0% tariff. This represents a reduction from an initial 32% tariff proposed by the U.S. Key commodities like palm oil, coffee, and cocoa will be exempt from tariffs when entering the U.S. Market.
In return, Indonesia will waive import duties on U.S. Products. The Indonesian government has also committed to:
- Purchase US$15 billion worth of U.S. Energy commodities.
- Purchase aviation-related goods and services from Boeing worth US$13.5 billion.
- Purchase agricultural products from the U.S. Worth US$4.5 billion.
Memorandums of Understanding
The two countries signed 11 Memorandums of Understanding (MoU) on February 18, 2026, totaling approximately US$38.4 billion (IDR 648.19 trillion) in investment across agriculture, energy, and technology sectors. One notable MoU involves extending mining permits and expanding operations for Freeport-McMoran in Grasberg, Papua.
Reactions and Next Steps
Coordinating Minister for the Economy Airlangga Hartarto emphasized that the agreement is based on mutual benefit, aiming for a “win-win situation” that benefits both the Indonesian and U.S. People. The agreement will be consulted with the DPR (Indonesian Parliament).
The agreement will take effect 90 days after the legal processes are completed by both parties. Business associations, such as the Indonesian Employers’ Association (Apindo), have been involved in the negotiation process and emphasize the importance of domestic readiness to maximize the benefits of the trade agreement.
Economists note that the agreement builds on previous tariff reductions and highlights the need for continued business-to-business negotiations and maintaining a trade balance surplus.