Indonesia is on the brink of sealing a groundbreaking trade agreement with the United States, encompassing crucial sectors like minerals, energy, defense cooperation, and market access. The nation’s chief negotiator expressed confidence in the imminent deal that promises significant tariff reductions.
“The government is committed to offering near-zero tariffs for over 1,700 commodities, accounting for nearly 70% of US imports,”
stated Indonesian Coordinating Minister for Economic Affairs Airlangga Hartarto. These concessions will cover key industries such as electronics, machinery, chemicals, healthcare, steel, agriculture, and automotive – aligning with US demands.
This bold move signals hope for Southeast Asia’s largest economy as it aims to lower the looming 32% tariff rate to a level below the recent 20% secured by Vietnam. Indonesia values its trade relationship with the US as it stands as the country’s second-largest export market after China.
Despite these positive strides, Hartarto mentioned that Indonesia is cautiously awaiting Washington’s final decision before higher tariffs potentially kick in next week. Financial markets reacted steadily to this development with the rupiah holding firm against the US dollar and stocks maintaining marginal losses.
Jeffrey Zhang from Credit Agricole highlighted that assessing the actual impact on Indonesia’s export sector requires comparing final US tariffs across various economies to determine changes in competitiveness.
In critical mineral sectors, plans are underway to grant preferential access to American buyers while ensuring transparent supply chain practices. This initiative aims to facilitate US firms’ avoidance of sourcing from Chinese-backed metals companies operating in Indonesia – known for housing substantial nickel reserves vital for battery production.
Moreover, Indonesia intends to boost imports of American gas and agricultural products to enhance food and energy security domestically. State-owned airline PT Garuda Indonesia is exploring potential collaborations involving aircraft purchases and maintenance services.
On the defense front, Indonesia plans to expand procurement of US military equipment solidifying its role as a dependable defense ally in the Indo-Pacific region. By relaxing local content regulations, enhancing intellectual property protection measures, and opening up national payment gateways to US providers; Indonesia seeks to offer fair treatment for American businesses—an aspect often highlighted by the US Trade Representative in its annual reports.
Hartarto emphasized that Indonesia envisions fostering a balanced economic partnership with tangible benefits for businesses and workers on both sides of the Pacific Ocean. The strategic alignment between Indonesia and the United States holds promise for mutual growth and prosperity across diverse industries.
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