July 28, 2025
JAKARTA – Indonesia is rushing to complete several trade deals to diversify its export market as a hedge against the impending tariff from the US, in a move welcomed by industry players.
A top Indonesian official said South-east Asia’s largest economy is seeking zero per cent tariff from trade deals with the European Union, which has 27 member countries.
It is also seeking a separate agreement with the Eurasian Economic Union, said Mr Susiwijono Moegiarso, the most senior bureaucrat at Indonesia’s Coordinating Ministry for Economic Affairs.
The members of the Eurasian grouping are Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia.
Indonesia is, additionally, accelerating to ratify a December 2024 Comprehensive Economic Partnership Agreement (Cepa) with Canada, he told a panel discussion in Jakarta on July 22, organised by Bank UOB Indonesia.
“We are rushing now to complete trade deals as part of our effort to expand markets,” Mr Susiwijono said, when asked by The Straits Times during the panel discussion.
“In the past two weeks, we have been travelling to a number of countries… and we have achieved concrete results,” he had said at the session.
When asked by ST about the impact of the Indonesia-EU deal, Mr Edwin Kadir, Bank UOB Indonesia’s executive director, said: “Palm oil, coffee bean, aroma essence (fragrance) are among the sectors that would most benefit from wider access to the European markets.”
The US has set a 19 per cent tariff on most goods from Indonesia under a new agreement. Certain goods, including processed nickel, coffee beans and others that are not produced by the US, may get a lower rate.
The 19 per cent rate, decided on July 15, is significantly lower than the 32 per cent announced by the Trump administration in April. The US tariff is set to take effect on Aug 1.
Mr Susiwijono said that the expected deal with the EU will take effect in 2026.
Indonesian President Prabowo Subianto and European Commission President Ursula von der Leyen had expressed their shared commitment in Brussels on July 13 to concluding the negotiations of the Indonesia-European Union Cepa, or IEU Cepa, a pact that has been under negotiation for the past 10 years.
Technical teams have put the deal under a “legal scrubbing process” before a slated agreement signing by both leaders in September, said Mr Susiwijono, referring to the pact’s final review and refinement.
“This IEU Cepa would be a game changer for Indonesia. Imagine our exports of Nike, Adidas shoes to Europe, compared with the same products from Vietnam, which has a free trade deal with the EU, hence a zero per cent tariff,” he said.
With no trade deal, shoes shipped to Europe from Indonesia have a 20 per cent tariff rate. International brands such as Nike and Adidas outsource production to independent suppliers which manufacture shoes based on provided specifications that include design, materials and quality standards.
“It has been years that our shoe manufacturers have to compete with Vietnam with this tariff gap burden,” said Mr Susiwijono.
Indonesia remains the world’s top exporter of palm oil, accounting for about half of global demand. The EU, historically Indonesia’s main export market, continued to import Indonesian palm oil in 2024 despite a decline in that year amid stricter sustainability standards being applied.
Indonesia and Eurasian countries have an in-principle agreement on a free trade deal, even as Jakarta is seeking a quicker ratification process with Ottawa on their trade deal.
The current No.1 destination for Indonesian exports is China, which accounted for about 23 per cent of total exports in dollar value in 2024, led by coal, palm oil and nickel, according to Indonesia’s statistics agency (BPS). The total exports to China were valued at US$65.84 billion (S$84.34 billion) in 2024.
Indonesia’s second-biggest export market is the US, with about 9.3 per cent of total exports in 2024, valued at US$28.18 billion, comprising mostly apparel, footwear, machinery and electrical goods.
This is followed by Japan (8.51 per cent, mostly industrial goods and mineral fuels); India (8 per cent, led by coal, palm oil and rubber); and Singapore (5 per cent, mostly re-exported goods).
The EU market accounted for US$21.47 billion in 2024, or 7.4 per cent, of Indonesia’s total exports in 2024, according to BPS.
The Netherlands and Germany are the top two European importers of Indonesian goods, including chemical products, vegetable oil, cocoa beans, footwear and electrical equipment.
Indonesia, meanwhile, imports vehicles, pharmaceuticals, electronic and medical instruments, among others, from the EU.
Mrs Shinta Kamdani, chairwoman of Apindo, the Indonesian Employers’ Association, said the business sector has been looking forward to seeing the completion of the IEU Cepa deal, and it has been involved in the negotiation for the last decade.
A Cepa does not just give market access but is also about capacity-building and cooperation, Mrs Shinta said in a July 23 panel discussion organised by the Jakarta Foreign Correspondents Club.
She said that as European buyers have high standards for imported products, the two parties need to work closely to reach common ground.
“It is not only about signing an agreement, but (also) how we can utilise the agreement,” Mrs Shinta said, pointing to Indonesia’s separate Cepa with Australia, which has been working well.
“A good example is with the Australians. We work very closely with our government, set up a task force on trade and investment, and the Australian government is supporting us,” she added.
The Indonesia-Australia Cepa came into effect on July 5, 2020, after the Parliaments of both countries ratified the deal following the official signing on March 4, 2019.
Mr Fithra Hastiadi, senior adviser to the Presidential Communication Office, concurs with Mrs Shinta on the EU’s high standards for goods, adding that Indonesia’s wider access to the market would help the country gain easier access to other markets.
“It creates a positive signalling effect, which in turn will help Indonesia enter other markets,” Mr Fithra said.