Trade Deal Crisis: US Accuses Indonesia of Breaking $19 Billion Promise
- The US-Indonesia trade pact is at risk of collapse as Washington accuses Jakarta of reneging on promises to remove non-tariff barriers and buy $19 billion in US goods.
- US Trade Representative Jamieson Greer is holding urgent talks with Indonesian Minister Airlangga Hartarto to save the deal which offers a tariff reduction from 32 percent to 19 percent.
A major trade agreement between the United States and Indonesia is teetering on the brink of collapse. The pact which was initially hailed as a diplomatic breakthrough in July now faces significant hurdles as US officials accuse Jakarta of backtracking on key commitments. The deal was designed to reduce US tariffs on Indonesian goods from a punitive 32 percent to a more manageable 19 percent. In exchange Indonesia promised to purchase $19 billion in American products including fifty Boeing jets and to dismantle non-tariff barriers that hinder US exports.
US Trade Representative Jamieson Greer is reportedly scrambling to salvage the framework. He is scheduled to hold critical talks with Indonesian Coordinating Minister for Economic Affairs Airlangga Hartarto this week. The urgency stems from a growing perception in Washington that Jakarta is reneging on agreements related to digital trade and agricultural access. American negotiators believe that Indonesia has lost the incentive to move quickly because President Donald Trump preemptively lowered the tariff threat before the deal was fully formalized.
The friction is not just about delays but also sovereignty. Indonesian officials are reportedly pushing back against clauses they view as an infringement on their economic independence. This resistance complicates the timeline for implementation especially as the deadline for the original tariff hike looms. The US is also seeking to include strict provisions on data localization and digital services which remain contentious points for developing economies wary of Big Tech dominance.
President Trump had personally championed this agreement and stated that he dealt directly with Indonesian President Prabowo Subianto to finalize the terms. The potential failure of this pact would be a significant diplomatic setback for the administration which has aggressively pursued bilateral trade deals across Southeast Asia. Similar frameworks have been unveiled with Thailand and Vietnam and Malaysia as part of a broader strategy to counter Chinese influence by integrating these economies closer to the US market.
The stakes for Indonesia are high. If the deal falls through the country faces the reinstatement of the 32 percent tariff on its exports to the US. This would place it at a competitive disadvantage compared to neighbors like Malaysia and South Korea which face lower duties of 25 percent. Coordinating Minister Airlangga Hartarto remains publicly optimistic and stated that negotiations are "moving in a positive direction" and that the proposal is undergoing "fine-tuning."
However the US side is growing impatient. Greer recently told a congressional panel that while he expects to sign more trade deals soon the specific terms with Jakarta remain elusive. The situation is further complicated by legal challenges in the US where the Supreme Court is currently reviewing the emergency authority Trump used to impose the sweeping tariffs in the first place. This judicial uncertainty adds another layer of complexity to an already fragile negotiation.
Indonesian negotiators are aiming for the lowest possible tariff rate ideally undercutting the 25 percent benchmark set for other ASEAN partners. Spokesperson Haryo Limanseto emphasized that there is still room for negotiation before the tariffs take effect. The government is acutely aware that securing a favorable deal is crucial for maintaining export competitiveness in key sectors like textiles and electronics.
Ultimately this diplomatic standoff highlights the risks of transactional trade policy. By front-loading the benefits—reducing the tariff threat early—the Trump administration may have inadvertently reduced its leverage. Now US officials must find a way to bring Jakarta back to the table without blowing up the entire framework. The outcome of this week's talks will likely determine whether the US-Indonesia trade pact becomes a model for the region or a cautionary tale of failed diplomacy.