Tariff update: Trump announces Indonesia trade deal, keeps details under wraps

US President Donald Trump has announced a trade agreement with Indonesia, although the specifics of the deal remain undisclosed. This disclosure follows a recent communication with Indonesian President Prabowo Subianto, as noted by Trump on his social media platform, Truth Social. "Great deal, for everybody, just made with Indonesia. I dealt directly with their highly respected President. DETAILS TO FOLLOW!!!", Trump stated, leaving many speculating about the potential impact of this agreement on international trade relations.

This announcement comes shortly after President Trump declared a 32% tariff on Indonesian products, effective from August 1, 2025. The tariff is being imposed due to what Trump described as an imbalance in the trade relationship between the two countries. In a letter to the Indonesian President, Trump stated, "Starting on August 1, 2025, we will charge Indonesia a tariff of only 32% on any and all Indonesian products sent into the United States, separate from all sectoral tariffs." This move has raised questions about the future trade dynamics between the United States and Indonesia.

The letter further elaborated on the reasons behind the tariff, suggesting it was a measure to address the trade deficit discrepancy with Indonesia. "Please understand that the 32% number is far less than what is needed to eliminate the trade deficit disparity we have with your country," the letter read. Trump indicated that there would be no tariffs if Indonesian companies chose to manufacture their products within the United States, promising swift approvals for such ventures.

Meanwhile, the European Union is also advancing its trade relations with Indonesia. European Commission President Ursula von der Leyen announced a political agreement to push forward the EU-Indonesia Comprehensive Economic Partnership Agreement (CEPA). "There's a lot of untouched potential in our trade relationship and therefore this agreement comes at the right time because the new agreement will open new markets," von der Leyen remarked at a recent press conference with President Subianto.

Indonesian President Prabowo Subianto expressed optimism about the EU's involvement in the region. "We consider Europe to be very important to us. That's why we would like to see more European presence and more European participation in our economy," he stated. Emphasising the importance of stability in current times, Subianto added, "I think that in this era of instability or confusion, we are setting a right example."

In the US, growing tariffs under Trump's administration are being scrutinised for their potential impact on inflation. Recent data from the Department of Labor showed the Consumer Price Index (CPI) rose 2.7% year-on-year in June, an increase attributed partly to higher energy costs. These developments highlight the broader economic implications of the US's tariff policies on both domestic and international fronts.