U.S. Market Access More Valuable Than Tariff Cuts, Indonesian Finance Ministry Says

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JAKARTA, Investortrust.id — Indonesia’s Finance Ministry has emphasized that gaining broader access to the United States market is more critical than maintaining import duties on American goods, as the two countries finalize a reciprocal trade agreement.

Director General of Fiscal and Economic Strategy Febrio Kacaribu said the 19% tariff cap imposed by the U.S. on Indonesian products would open the door for greater exports, particularly from labor-intensive sectors. In return, Indonesia has agreed to eliminate tariffs on most U.S. goods.

“What matters most is that we gain access to the American market,” Febrio told Investortrust on Tuesday, July 22, 2025.

Febrio said the elimination of tariffs on U.S. goods would have minimal impact on state revenue, since U.S. imports already faced relatively low duties. He noted the arrangement would not affect Indonesia’s tax revenue target for 2026.

Support for Labor-Intensive Industries

The tariff agreement is expected to enhance Indonesia’s competitiveness in labor-intensive industries such as textiles, footwear, electronics, palm oil, and furniture.

“This will immediately benefit our labor-intensive sectors,” Febrio said, underlining the broader economic implications beyond fiscal calculations.

The U.S. market, one of the world’s largest, offers a valuable opportunity for Indonesia to boost its export-driven sectors amid slowing global demand and rising protectionism.

Looking ahead, Febrio said Indonesia is preparing to reap similar benefits from the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA), which is expected to take effect in 2026. The pact is projected to further expand export opportunities for Indonesian businesses across the European bloc.

Tariff Implementation Timeline Still Pending

Coordinating Minister for Economic Affairs Airlangga Hartarto clarified that the 19% U.S. tariff cap on Indonesian goods will not automatically apply on August 1, 2025. The rate will only be enacted after both countries release a joint statement.

Until then, a base tariff rate of 10% will be enforced for countries with confirmed tariff alignment. Airlangga did not provide a specific date for the announcement but noted, “It could come sooner or later—but the 10% base rate will remain in effect.”

Steel Industry Seeks Tariff Relief

Meanwhile, the Indonesian Iron and Steel Industry Association (IISIA) is urging the government to negotiate lower import duties on Indonesian steel products, which currently face a 50% tariff in the U.S.

Speaking to Investortrust on Tuesday, IISIA Executive Director Harry Warganegara said the association had submitted the request to Airlangga Hartarto. He suggested U.S. tariffs on Indonesian steel should be reduced to around 25%, mirroring rates offered by the United Kingdom.

Although Indonesia’s steel exports to the U.S. remain modest—between 70,000 and 80,000 tons per year—Harry said the U.S. market holds strategic potential.

“If we can secure a larger market share in the U.S., our exports will definitely grow. Textiles may be dominant now, but with lower tariffs, steel can compete too,” he said.

Food and Beverage Industry Eyes Vietnam Rivalry

Indonesia’s processed food and beverage sector is also eyeing a larger slice of the U.S. market. With U.S. import tariffs for Indonesian products lowered to 19%, industry players believe they can outpace competitors from Vietnam, whose tariffs remain higher at 20%.

“We can improve our competitiveness and hope to increase our U.S. exports, even overtaking Vietnam,” said Adhi S Lukman, Chairman of the Indonesian Food and Beverage Producers Association (Gapmmi).

However, Adhi warned that the current tariff reduction remains provisional until finalized by August 1. He urged the government to expedite the deal, including fulfilling commitments to import U.S. agricultural commodities such as wheat, corn, soybeans, and dairy.

“The negotiations are ongoing. We’ve already committed to import certain agricultural products, but we need to finalize this quickly,” Adhi said, while also expressing hope for even lower tariffs in the final agreement.