Jakarta. A minister has denied reports that Indonesia’s tariff deal with the US was on the brink of collapsing, citing that negotiations are still underway. 

The Financial Times recently reported that Washington was frustrated by how Indonesia had been reneging on the deal reached in July, quoting people familiar with the negotiations. The anonymous source claimed that Indonesia was not just “slowrolling the implementation” but was outright saying that it could not do what they had initially agreed on. The article wrote that Indonesia was also “backsliding” on removing the non-tariff barriers on American industrial and agricultural goods, as well as digital trade issues. 

Trade Minister Budi Santoso quickly dismissed the report that the deal was in jeopardy.

“No [such problems]. We are still negotiating the agreement,” Budi said in Jakarta on Wednesday. 

He went on to say that Indonesia was hoping to finish the negotiations “as soon as possible”, again, being vague with the deadline.

On July 22, the White House unveiled a framework agreement with Indonesia. In that document, US President Donald Trump agreed to slash his reciprocal tariffs on Indonesian goods from 32 percent to 19 percent. While Jakarta got the import tax reductions, Southeast Asia’s biggest economy had to make some sacrifices to appease Trump’s tariff wrath. 

It promised to eliminate virtually all tariffs for American industrial and agricultural products, on top of committing to $4.5 billion in agri-imports, according to the joint statement. Indonesia also vowed to address barriers impacting digital trade, while also providing certainty on cross-border personal data transfer. The tariff fiasco all started with Trump’s concerns over the US trade deficit with Indonesia, which totaled $17.9 billion in 2024.

Indonesia’s chief negotiator Airlangga Hartarto is currently accompanying President Prabowo Subianto on his overseas trip.

Airlangga not long ago denied that the poison pill clause had stalled the negotiations. The poison pill clause in question has Trump reimposing higher tariffs if the signatory enters into a new trade deal that “jeopardizes US essential interests”. Another clause obliges the signatory to mirror import restrictions that Trump slaps on other trading partners.

Malaysia -- Indonesia’s close neighbor -- has agreed to these loyalty provisions in exchange for zero tariffs on selected US-bound products, including palm oil. World’s largest palm oil supplier Indonesia is seeking similar tariff exemptions in the current negotiations.

Economists view the agreement as one of Trump’s attempts to weaken China’s influence. At home, businesses have warned the Indonesian government against falling into the same trap as Malaysia. 

“We have urged the government to simply focus on bilateral trade and investment in the negotiations. From the very beginning, the reciprocal tariffs stemmed from [US] deficits,” Anne Patricia, the head of trade affairs at the business lobby Apindo, said.

Over the years, Indonesia has kept a neutral stance in the US-China rivalry. China is Indonesia’s top foreign investor, and annual trade figures remain substantial, even reaching nearly $125 billion as of October. Prabowo’s support for Trump’s plan on Gaza had also made the two leaders closer. 

Read More: ‘Indonesia Must Not End Up Trapped Like Malaysia’: Businesses on US Tariff Talks
 

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