Indonesia have concluded a free trade agreement with the EU after almost a decade of negotiations, with both sides intent on boosting exports, investments, and offsetting the Trump Administration’s tariffs.
Indonesian exports are currently subject to a 19 per cent US tariff.
Both sides have committed to removing import duties on over 90 per cent of products. Indonesia reported it expects bilateral trade, worth roughly $30.1 billion for goods in 2024, to double in the first five years, with the agreement set to take effect on 1 January 2027, reported Reuters.
According to Reuters, Trump’s tariffs spurred EU Member States to forge new trade alliances in the hope of offsetting the tariff’s impact while minimising dependency on China.
Following this agreement, the EU stated that its exporters will be spared €600 million ($707.4 million) in Indonesian duties and predicts an uptick in sales of chemicals, machinery, automobiles, and food products.
Conversely, Indonesia looks to boost its exports of palm oil, coffee, textile, and clothing products.
The agreement still awaits legal checks and translation into the EU’s official languages, after which EU governments and the European Parliament must grant formal consent.
Speaking in Bali, EU Trade Commissioner Maroš Šefčovič said the trade agreement would strengthen European investment in Indonesia and enhance the bloc’s access to critical minerals essential for its clean tech and steel industries, including nickel, copper, bauxite, and tin, reported Reuters.
Meanwhile, Eddy Martono, Chairman of the Indonesian Palm Oil Association (GAPKI), said the deal would also eliminate tariffs on palm oil exports to the EU, one of the sector’s major buyers.
Earlier this summer, the US and EU reached a trade agreement that imposes a 15 per cent import tariff on most EU goods, thereby averting a larger trade war and de-escalating tensions between the two economic blocs, which together account for almost a third of global trade.
