US-Indonesia Trade Deal Signed, Raising Economic Concerns

A landmark trade agreement between the United States and Indonesia was finalized on February 19, 2026, during a state visit by Indonesian President Prabowo Subianto to Washington, D.C. While hailed as a “great deal” by the White House, the agreement has sparked debate among regional economists regarding its potential impact on Indonesia’s economic outlook and trade balance.

Key Terms of the Agreement

The agreement outlines significant changes to trade relations between the two countries. Indonesia has committed to eliminating tariffs on over 99% of U.S. Products exported to Indonesia, encompassing sectors like agriculture, health products, seafood, information and communications technology, automotive products and chemicals. White House Fact Sheet

In return, the U.S. Has agreed to maintain a 19% tariff on Indonesian goods, with exceptions for textiles and apparel, which will receive reciprocal 0% tariffs. This rate is lower than the previously threatened 32% but remains above the World Trade Organization’s most-favored-nation principle. Antara News

Indonesia has also pledged to purchase over $30 billion worth of U.S. Aircraft, energy, and farm products. White House Fact Sheet

Economic Implications and Concerns

Economists express concerns that the agreement, designed to expand U.S. Access to the Indonesian market, could pressure Indonesia’s bilateral trade balance. Josua Pardede, chief economist at Permata Bank in Jakarta, noted a “realistic risk” that Indonesian imports could increase faster than exports, potentially straining the current account and the rupiah. Antara News

Priyanka Kishore, director and principal economist at Asia Decoded, suggests the lowered U.S. Tariffs may ease pressures on Indonesia’s labor-intensive export industries, but the net effect hinges on Indonesia’s ability to increase its U.S. Market share and attract investment. Antara News

Other factors, such as a recent Moody’s downgrade of Indonesia’s credit rating outlook and concerns from MSCI regarding the Indonesian stock exchange, could further dampen foreign investment, potentially depreciating the rupiah. Antara News

Business Summit and Investment

Prior to the signing ceremony, a US-Indonesia Business Summit was held on Wednesday, February 18, 2026, resulting in $38.4 billion worth of trade deals. Antara News Attendees included representatives from the U.S. Chamber of Commerce (USCC), the US-ASEAN Business Council (USABC), the US-Indonesia Society (USINDO), and the Indonesian Chamber of Commerce and Industry (Kadin). Antara News

President Prabowo Subianto met with business leaders from USCC, USABC, and USINDO, accompanied by several ministers from the Red and White Cabinet. Antara News

Indonesia’s Economic Growth

Indonesia’s economy experienced a three-year high in 2025, growing by 5.11% due to increased exports and strong domestic demand. The government aims for 5.4 to 5.6% growth in 2026. Antara News Economists suggest sustained growth will require government stimulus programs, potentially leading to increased debt. Antara News Diversifying markets beyond the U.S. Is also considered crucial to mitigate the impact of potential tariffs. Antara News