ASIATODAY.ID, JAKARTA — The Government of Indonesia officially signed The Agreement on Reciprocal Trade (ART) with the United States on February 19, 2026.
What is the urgency behind the agreement, and what are its implications for the national economy?
Below is the official explanation from Coordinating Minister for Economic Affairs, Airlangga Hartarto.
Background and Framework of the ART
1. What prompted Indonesia to negotiate the Reciprocal Tariff arrangement with the United States?
On April 2, 2025, the U.S. Government unilaterally imposed a 32% Reciprocal Tariff on countries contributing to the U.S. trade deficit, including Indonesia (U.S. data recorded a USD 19.3 billion trade deficit with Indonesia in 2024).
The Indonesian Government determined that negotiations were necessary to preserve export competitiveness and protect approximately 4–5 million direct workers in labor-intensive industries affected by the tariff. Rather than pursuing retaliatory measures that could escalate tensions and harm the domestic economy, Indonesia chose a diplomatic approach.
Intensive negotiations led to a reduction of the Reciprocal Tariff from 32% to 19% on July 15, 2025, as outlined in the Joint Statement on Framework ART. The statement committed both governments to finalize the agreement.
On February 19, 2026, the Presidents of Indonesia and the United States formally signed the ART. The agreement establishes the agreed Reciprocal Tariff level and grants tariff exemptions for Indonesia’s leading export products, including palm oil, cocoa, coffee, rubber, and textiles entering the U.S. market.
2. When will the ART enter into force?
The agreement will enter into force 90 days after both countries submit written confirmation that all required domestic legal procedures—including consultations and ratification—have been completed.
3. Can the ART be amended?
Yes. The agreement may be reviewed and amended at any time upon written request and mutual consent of both parties.
Benefits of the ART for Indonesia
4. Beyond tariff reductions, what benefits does Indonesia gain?
Strengthening Export Competitiveness
– 0% Reciprocal Tariff for priority export products such as palm oil, coffee, cocoa, and others.
– Tariff exemptions for 1,819 Indonesian products (1,695 industrial goods and 124 agricultural goods under MFN treatment).
– Indonesian textile exports will benefit from tariff reductions of up to 0% through a Tariff-Rate Quota (TRQ) mechanism.
Encouraging Investment and Business Facilitation
– Improved investment access, particularly in high-technology sectors such as ICT, medical devices, and pharmaceuticals, through adjustments to local content (TKDN) policies and domestic deregulation.
– Implementation of Strategic Trade Management, signaling Indonesia’s commitment to a secure and responsible trade ecosystem, particularly for high-value and high-technology goods.
– Simplified import licensing and standardization requirements for U.S. agricultural products to ensure efficient access to raw materials and support national food security.
– More flexible foreign ownership limitations for U.S. companies in selected sectors, including mining divestment and certain financial services restrictions.
Indonesia’s Market Access Commitments
5. What market access commitments has Indonesia granted to the United States?
Indonesia will provide 0% tariffs for 99% of U.S. products, effective upon the agreement’s Entry Into Force (EIF).
Indonesia also commits to reducing non-tariff barriers, particularly regarding import licensing, local content requirements (TKDN), recognition of U.S. standards, and halal certification procedures.
6. What U.S. products will Indonesia purchase under the ART?
As part of efforts to balance trade and ensure domestic energy security, Indonesia agreed to purchase:
Metallurgical coal
LPG
Crude oil
Refined gasoline
Commercial aircraft, components, and aviation services
Agricultural commodities for the food and beverage and textile industries
Agricultural Imports from the United States
7. Why allow the import of 1,000 tons of rice from the U.S.?
The allocation concerns specialty-classified rice and remains subject to domestic demand. Over the past five years, Indonesia has not imported rice from the U.S. The 1,000-ton commitment represents only 0.00003% of Indonesia’s 2025 rice production of 34.69 million tons and is therefore not significant.
8. Will poultry imports from the U.S. disrupt domestic farmers?
Indonesia imports U.S. poultry primarily in the form of Grand Parent Stock (GPS)—approximately 580,000 birds valued at USD 17–20 million—to meet domestic genetic breeding needs, as no domestic GPS breeding facilities currently exist.
Imports of poultry cuts are permitted under existing health and safety regulations. Additionally, Indonesia imports mechanically deboned meat (MDM) (approximately 120,000–150,000 tons annually) for processed food production.
The Government remains committed to protecting domestic poultry farmers and maintaining supply and price stability.
9. Does Indonesia commit to mandatory annual imports of U.S. corn?
The agreement grants access for U.S. corn imports for use in the food and beverage industry, with 2025 demand estimated at 1.4 million tons.
The food and beverage sector contributes 7.13% to Indonesia’s GDP, accounts for 21% of non-oil and gas industrial exports (USD 48 billion), and employs 6.7 million workers.
Other Imports from the United States
10. Why allow U.S. alcoholic beverage imports?
In 2025, Indonesia’s alcohol imports totaled USD 1.23 billion, with U.S. products accounting for USD 86.1 million (7%). All imports remain subject to licensing and food safety regulations under the supervision of Badan Pengawas Obat dan Makanan.
11. Are second-hand clothes from the U.S. permitted?
No. The agreement regulates imports of shredded worn clothing (SWC), which are processed into industrial raw materials for recycled textile production. It does not allow the import of second-hand garments for resale.
Safeguards Against Import Surges
12. What if U.S. imports flood the domestic market?
The ART establishes a Council on Trade and Investment to monitor implementation and address significant import surges that could disrupt domestic markets. Indonesia retains the right to apply safeguard, anti-dumping, and countervailing measures consistent with WTO rules.
Non-Tariff Provisions
13. How is personal data protected?
Cross-border data transfers under the ART remain subject to Indonesia’s Personal Data Protection Law. There is no surrender of data sovereignty. Transfers will adhere to secure and reliable data governance standards, supporting Indonesia’s ambition to become a regional digital economy hub.
14. Is halal certification waived for U.S. products?
No. Halal certification remains mandatory for food and beverages. Non-halal products must be clearly labeled. Indonesia and the U.S. have a Mutual Recognition Agreement (MRA) with recognized U.S.-based halal certification bodies.
15. Will 0% tariffs harm MSMEs and local industries?
Indonesia’s average effective MFN tariff rate is approximately 8.1%. Around 80% of Indonesia’s trade is already covered under FTAs or CEPAs with preferential tariffs.
Most goods benefiting from 0% tariffs are industrial inputs, capital goods, and raw materials needed by domestic businesses, including MSMEs. If domestic industries are threatened, Indonesia may impose safeguard, anti-dumping, or countervailing measures consistent with WTO provisions.
16. Will U.S. medical and pharmaceutical products bypass Indonesian testing?
Products approved by the U.S. Food and Drug Administration are recognized as meeting stringent global standards. However, administrative licensing and regulatory oversight remain under Indonesian authorities. If safety concerns arise, Indonesia retains full supervisory authority.
17. Are U.S. companies exempt from local content (TKDN) requirements?
No. TKDN requirements remain applicable in government procurement. Commercial goods sold in the domestic market are not automatically subject to TKDN requirements.
18. Are U.S. companies exempt from VAT?
No. Value Added Tax (VAT) continues to apply on a non-discriminatory basis.
19. Does the ART allow raw critical mineral exports to the U.S.?
No. Indonesia’s ban on raw mineral exports remains in effect. The ART encourages cooperation in downstream processing and mineral refining within Indonesia.
20. Are U.S. digital platform companies exempt from cooperating with Indonesian media companies?
Indonesia agreed not to mandate paid licensing or revenue-sharing mechanisms. However, voluntary cooperation remains possible. The Government is also considering a Digital Services Tax (2–7%), in line with OECD practices, to support digital literacy and quality journalism.
Commercial Agreements Under ART
The ART includes commercial commitments aimed at balancing trade and ensuring essential supplies:
– USD 15 billion in energy purchases (LPG, crude oil, gasoline)
– USD 13.5 billion in commercial aircraft and components
– USD 4.5 billion in agricultural commodities (cotton, soybeans, soybean meal, wheat, and corn)
Scope of the Agreement
22. Does the ART address security or South China Sea issues?
No. The ART strictly covers trade and investment matters. It does not address defense, security, national security, or border security issues.
The ART represents a strategic economic diplomacy initiative designed to protect exports, strengthen industrial resilience, attract investment, and maintain Indonesia’s economic sovereignty while preventing trade escalation. (AT Network)
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