ASIATODAY.ID, JAKARTA — Indonesia has reached two significant milestones in international trade diplomacy, signing strategic agreements with both the United States (US) and the European Union (EU).
These developments mark a pivotal step in strengthening Indonesia’s position in the global supply chain while opening new opportunities for domestic industry expansion — particularly in labor-intensive sectors and among micro, small, and medium enterprises (MSMEs).
These agreements are expected to deliver immediate benefits, including increased national exports, job security, and enhanced competitiveness for Indonesian products in international markets.
In its deal with the United States, Indonesia adopted a direct purchase strategy for key U.S. commodities, including energy and agricultural products.
According to Coordinating Minister for Economic Affairs Airlangga Hartarto, this approach is more effective than gradual tariff reductions, as it can provide a quick impact on the trade balance.
“One of the most tangible impacts is that, following President Trump’s announcement, orders for Indonesian textiles, apparel, and footwear have resumed. Without this move, U.S. buyers would have withheld their orders — potentially triggering mass layoffs in our labor-intensive industries,” Airlangga said on Monday, July 21, 2025.
He further explained that energy imports from the U.S. do not increase Indonesia’s overall import burden but rather shift sourcing from other countries — such as those in the Middle East and Africa — to the United States. This strategic shift gives Indonesian exporters, particularly in textiles and footwear, a competitive edge in the U.S. market.
Gains from the EU Deal: Zero Tariffs for Over 90% of Indonesian Exports
The agreement with the European Union is embedded within the Indonesia–European Union Comprehensive Economic Partnership Agreement (IEU-CEPA). Under this deal, over 90% of Indonesian exports to the EU will enjoy zero tariffs, significantly increasing their price competitiveness in the European market.
With this tariff removal, the Indonesian government projects exports to the EU to reach USD 60 billion over the next eight years. Sectors expected to benefit most include furniture, textiles, coffee, spices, and creative industries.
“This agreement is not just about trade figures; it is part of Indonesia’s long-term strategy to promote downstream processing and industrial value-addition,” Airlangga explained.
Beyond boosting large-scale industries, the agreements also open new avenues for Indonesian MSMEs to enter the global market. The government is encouraging smaller businesses to adopt Industry 4.0 practices and take advantage of the expanded export access — particularly in furniture, fashion, handicrafts, and other creative sectors.
Next Steps: Canada, Latin America, and Africa on the Horizon
Indonesia’s trade expansion strategy doesn’t stop with the U.S. and the EU. The country has concluded trade negotiations with Canada, is actively involved in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and is exploring new bilateral trade routes with countries in Latin America and Africa.
“Our target is 8% economic growth. To reach that, we must open new markets, enhance industrial competitiveness, and implement ongoing deregulation so that Indonesian products become more globally accepted,” Airlangga emphasized.
Indonesia’s strategic trade deals with the United States and European Union represent more than just diplomatic wins — they are catalysts for economic transformation. Key takeaways include: Increased national export volume, Stability in labor-intensive industries, Expanded market access for MSMEs, Acceleration of industrial downstreaming.
With a bold and forward-looking trade strategy, Indonesia is solidifying its status as a rising economic force in the Indo-Pacific region. (AT Network)
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