Indonesia to remain top US palm oil supplier thanks to tariff deal

Indonesia has announced the end of lengthy trade negotiations with the United States, which resulted in a significant reduction in tariffs on Indonesian exports.

According to Jakarta Global, the parties reached an agreement after “extremely difficult” negotiations. The key achievement was a significant reduction in the tariffs proposed by the United States on Indonesian goods — from the original 32% to 19%.

An important advantage is that the new tariff rate is significantly lower than that of its main regional competitor, Malaysia. For Malaysian exporters, the rate remains at 25%, which creates more favorable conditions for Indonesian producers to enter the American market.

Experts note that the agreement reached could significantly affect trade relations between the countries of Southeast Asia and the United States, as well as change the balance of power in the region. The details of the agreement and its long-term consequences are still being analyzed by experts.

The deal is one of the few reached by the Trump administration before an Aug. 1 deadline for negotiations. Presidential spokesman Hassan Nasby called the deal a “meeting point” between the two governments and said Indonesia’s tariff rate is much lower than other Southeast Asian countries.

Trump said Indonesia, Southeast Asia’s largest economy, has committed to buying 50 Boeing jets, $15 billion in U.S. energy products and $4.5 billion in U.S. agricultural products as part of its trade deal with the United States.

It also imposed a penalty rate on so-called transhipment of goods from China through Indonesia.

Indonesia’s stock index rose 0.7% on Wednesday after the deal, which some analysts say will be a positive catalyst for economic activity.

Analysts agree that Indonesia’s non-oil exports, such as footwear and textiles, will suffer, but energy and agriculture are likely to benefit.

Agriculture Minister Andi Amran Sulaiman noted that the difference in tariff rates could give Jakarta an advantage over Malaysia in the palm oil trade with the United States. The country exported 2.2 million tonnes of palm oil to the United States last year, worth about $2.9 billion, according to the Indonesian Palm Oil Association (GAPKI). Indonesia accounts for about 85% of US palm oil imports.

However, experts note that the Indonesian economy will still suffer from Trump’s tariffs on China, Indonesia’s largest trading partner.

In total, Indonesia exported 29.5 million tonnes of palm oil products in 2024. This year, as it became known earlier, the country planned to increase palm oil exports by 1 million tons compared to last year’s figure – to 25 million tons.

Tags: Indonesia, palm oil, USA