Trump Announces Trade Deal With Indonesia

This article was originally published by The Epoch Times: Trump Announces Trade Deal With Indonesia

The trade relationship between the United States and Indonesia has been marked by a substantial goods trade deficit, currently standing at a staggering $17.9 billion.

In a recent announcement via social media, President Donald Trump proclaimed a new trade agreement with Indonesia, boasting about the deal’s benefits for all parties involved. “Great deal, for everybody, just made with Indonesia. I dealt directly with their highly respected President,” he stated on July 15 in a post on Truth Social.

Trump elaborated that Indonesia would face a 19 percent tariff on its exports to the U.S., while American goods would enjoy tariff-free access to the Indonesian market. “You have to understand, we had no access into any of these countries,” he remarked, emphasizing that this agreement would rectify that lack of access.

This announcement follows Trump’s earlier communication to Indonesia, which included a formal notice of a forthcoming 32 percent tariff on Indonesian imports to the U.S., set to take effect on August 1.

According to data from the U.S. Trade Representative’s Office, the U.S. goods trade deficit with Indonesia rose by 5.4 percent in 2024 compared to the previous year, highlighting the growing economic imbalance.

Indonesia’s primary exports to the United States include consumer electronics, apparel, and footwear, which are now potentially subject to the new tariffs.

In a proactive approach, Trump also reached out to over 20 U.S. trading partners, including Japan, South Korea, and Canada, to inform them about the newly established tariff rates.

In an interesting twist, Trump noted that Indonesian companies would be exempt from these tariffs if they choose to build or manufacture their products in the United States. This approach seems to encourage foreign investments while simultaneously addressing the trade imbalance.

However, the backdrop of this deal reveals more complex dynamics. The National Trade Estimate Report, released shortly before Trump shared his tariff plans on April 2, highlighted that Indonesia had been employing aggressive tariffs and various non-monetary trade barriers, which U.S. trade officials criticized as discriminatory against American businesses.

In a follow-up post on Truth Social, Trump announced that Indonesia agreed to purchase $15 billion in U.S. energy, $4.5 billion in agricultural products, and 50 Boeing jets, framing it as a pivotal moment for American agriculture and manufacturing sectors. “For the first time ever, our ranchers, farmers, and fishermen will have complete and total access to the Indonesian market of over 280 million people,” he stated.

Eyes on August

This agreement marks Trump’s fourth trade arrangement since the announcement of reciprocal tariffs on April 2. The administration has also secured deals with the United Kingdom, China, and Vietnam, with assurances of further announcements anticipated by next month.

Notably, Trump extended the deadline for reciprocal tariffs to August 1, insisting that “no extensions will be granted.” This strategy is purportedly aimed at expediting the establishment of additional trade agreements.

Interestingly, Trump projected a more flexible approach to trade negotiations, suggesting a willingness to engage in prolonged discussions. “We can do things over the years, too,” he said, indicating a departure from a hard-line stance.

Another critical date looms on August 12, when the current U.S.-China tariff truce is set to expire. However, Treasury Secretary Scott Bessent reassured markets, stating that there is no need for concern, citing Nvidia’s recent licensing success to sell chips to China as a sign of easing tensions.

“Nvidia hopes to start deliveries soon,” the company announced, suggesting that U.S.-China relations may be stabilizing, allowing both nations to progress to the next phase of negotiations regarding trade and market access.

Watching Inflation

The latest consumer price index (CPI) report for June presents a mixed picture on whether tariffs are exacerbating inflationary pressures. The annual inflation rate increased to 2.7 percent from 2.4 percent in May, with monthly consumer prices rising by 0.3 percent—both figures aligning with economists’ predictions.

Meanwhile, annual core inflation, which excludes volatile energy and food prices, rose to 2.9 percent. These readings fell short of consensus expectations, indicating that while input costs may be rising, consumer prices have remained relatively stable.

As noted by Bill Adams, chief economist at Comerica Bank, businesses may be awaiting clarity on the impact of tariffs before adjusting their pricing strategies. A slowdown in consumer demand could lead companies to absorb the costs associated with tariffs temporarily, rather than passing them on to consumers.

In a July 14 interview with CNBC’s “Squawk Box,” National Economic Council Director Kevin Hassett dismissed concerns that Trump’s tariff policies would reignite inflation. He suggested that a sense of “patriotism” is reflected in the economic data, as Americans increasingly recognize the value of purchasing domestic products.

This week, the Bureau of Labor Statistics is expected to release trade prices for June, with last month’s import prices remaining stagnant at zero percent, while export prices fell by 0.9 percent.

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