Indonesia and the European Union (EU) concluded a landmark trade agreement on Tuesday after nine years of talks. The deal will eliminate or reduce tariffs to near zero on almost all goods, strengthening ties between the two partners amid tariffs imposed by U.S. President Donald Trump.
EU Commissioner for Trade and Economic Security Maros Sefcovic said the agreement will open a new chapter and remove restrictions on transactions involving key raw materials. Both sides will remove import duties on more than 90 percent of products, most of them as soon as the deal enters force, with the rest, including Indonesia’s 50 percent duty on EU cars, phased out over five years.
Indonesia says it expects bilateral trade with the EU, worth $30.1 billion for goods as of 2024, to double in the first five years. The EU is Indonesia’s fifth-largest trading partner, with bilateral trade continuing to expand.
EU seeks trade deals to offset impact of Trump’s tariffs
Since U.S. President Donald Trump’s re-election, the EU has intensified efforts to secure new trade deals, striking agreements with Mercosur and Mexico while fast-tracking talks with India. The 27-member bloc aims to cushion the blow from Trump’s tariffs and reduce reliance on China, especially for critical minerals needed in its green transition.
Under the Indonesia-EU trade deal, tariffs on 96 percent of goods will be reduced to zero over five years. EU exports to Indonesia are expected to increase by at least 30 percent, equivalent to about 3 billion euros.
Tariffs on European cars will be lowered from 50 percent to zero within five years, while tariffs on machinery and equipment will be cut from 30 percent to zero immediately.
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EU exporters to avoid $707 million in Indonesian tariffs
As part of its push, the EU highlighted that its exporters will avoid $707 million in Indonesian tariffs, creating fresh opportunities to boost sales of chemicals, machinery, automobiles and food products such as milk powder and cheeses, even as Indonesian exports continue to face a broad 19 percent U.S. tariff.
Indonesia expects the pact to lift exports of palm oil, coffee, textiles, clothing, and other goods, with a target start date of January 1, 2027. Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto said the deal would also strengthen supply chains in areas such as critical minerals, renewable energy, innovation, and investment.
He added that Indonesia is already in talks with EU automakers on battery and electric vehicle production partnerships in the country.
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