Prabowo and Trump strike tariff deal – but at what cost to Indonesia?
SINGAPORE – The trade deal announced on July 15 lowering US tariffs on Indonesian goods is seen by some as a diplomatic win for President Prabowo Subianto, though others warn that he may have overpromised and burdened Indonesia with costly commitments.
US President Donald Trump broke the news on his Truth Social platform, saying that he had
struck a trade pact with Indonesia following negotiations with Mr Prabowo to avoid steeper tariffs.
'They are going to pay 19 per cent and we are going to pay nothing... We will have full access into Indonesia, and we have a couple of those deals that are going to be announced,' he later told reporters.
No details have been given about the deal, which comes after deals Mr Trump
has made with Vietnam and the United Kingdom. The US President had threatened Indonesia with a 32 per cent tariff rate starting Aug 1 in a letter last week.
Mr Prabowo on July 16 said his conversation with Mr Trump heralded 'a new era of mutual benefit' between both sides.
As part of the deal, Indonesia has committed to purchasing US$15 billion (S$19 billion) in US energy, US$4.5 billion in American agricultural products, and 50 Boeing jets, many of them 777s.
The sheer scale of Indonesia's purchase commitments, and the lack of clarity on how they will be financed and integrated with national strategies, has raised eyebrows, with experts warning that the deal could set a precedent for other trade partners to demand similar 'full access' terms.
Top stories
Swipe. Select. Stay informed.
Singapore Over 600 Telegram groups in Singapore selling, advertising vapes removed by HSA
Singapore 2 weeks' jail for man caught smuggling over 1,800 vapes and pods into Singapore
Singapore Strong argument for cockpit video recording, says Iata chief in wake of Air India crash report
Singapore Here comes the sun: Less rain, more warm days in second half of July
Singapore ComfortDelGro to introduce new taxi cancellation, waiting fee policy
Singapore Baby died after mum took abortion pills and gave birth in toilet; coroner records an open verdict
Asia Former deputy minister seen as surprise front runner for Malaysia's next Chief Justice: Sources
Business Tycoon Robert Kuok's daughter Kuok Hui Kwong appointed CEO of Shangri-La Asia
Associate Professor Yohanes Sulaiman of Jenderal Achmad Yani University in West Java highlighted the plan to buy the Boeing jets, noting that national carrier Garuda Indonesia is still struggling financially and unlikely to be in a position to take on large-scale purchases.
In the first quarter of 2025 alone, the state-owned carrier recorded a net loss of US$75.9 million, surpassing its already-large net loss for the entire 2024 fiscal year.
When asked about the planes on July 16, President Prabowo said that Indonesia needs to grow the national carrier's presence, and to do so, new aircraft were needed.
There are also doubts about the energy component. While Indonesia does import liquefied petroleum gas and other fuels, analysts say a US$15 billion commitment would run counter to the government's ambitions to reduce fossil fuel dependency and boost renewables.
The scale of the energy imports is not aligned with Indonesia's energy transition goals, and this could introduce fiscal strain and policy contradictions down the line, noted Dr Siwage Dharma Negara, a senior fellow at the ISEAS-Yusof Ishak Institute.
'The arrangement doesn't necessarily reflect a balanced, win-win outcome,' he said, warning that Indonesia has to keep in mind the longer-term costs. 'It remains unclear whether the economic benefits fully justify the scale of concessions offered by Jakarta.'
Indonesia's goods trade with the US reached nearly US$40 billion in 2024, with a roughly US$18 billion surplus, and key exports including electronics, footwear, car tyres, palm oil and frozen shrimp.
Indonesia's central bank on July 16 delivered its fourth interest rate cut since September, trimming its benchmark rate by 25 basis points to 5.25 per cent in a bid to support the economy amid weakening global trade and sluggish domestic demand.
Sluggish household spending had already weakened growth in the first quarter, while the outlook for subsequent quarters has been clouded by the impact of US tariffs on global trade.
Some observers found the direct negotiation between the two leaders notable. This growing personal rapport was most visibly demonstrated in November 2024, when Mr Prabowo posted a video of his congratulatory call to Mr Trump, in which he offered to fly over in person, and referenced his American military training.
Bank Permata economist Josua Pardede said Mr Trump singling out Mr Prabowo and calling him 'highly respected' was more than symbolic, chalking it up as a win for the Indonesian leader and his foreign policy approach.
'Such direct acknowledgment from a global leader underscores President Prabowo's capability to manage complex international relations and signals strength and credibility to both domestic and international stakeholders,' he said.
The agreement signals that Mr Prabowo is willing to make bold economic moves to safeguard Indonesia's interests, said Dr Siwage.
'Mr Trump's public acknowledgment of a direct deal with Mr Prabowo suggests that Indonesia took an active role in shaping the outcome,' he said, adding that this highlights how both leaders prefer a personal, transactional style of diplomacy.
Other experts, however, cautioned that the deal may carry ripple effects across Indonesia's wider network of economic relationships.
Mr Muhammad Habib Abiyan Dzakwan from the Centre for Strategic and International Studies (CSIS) warned that the nature of the arrangement, involving significant import concessions, could prompt demands from other economic partners.
'What I am concerned the most is the extent of this unusual arrangement would then affect Indonesia's relations with Asean neighbours and Free Trade Agreement partners. More partners will likely demand the same concession from Indonesia,' he said.
In particular, countries like China, the archipelago's largest trading partner and one of its top investors, may view Jakarta's increasingly close economic overtures to the US with suspicion, he added.
However, he cautioned that the government must ensure it has sufficient budget and fiscal space not only to meet these obligations, but also to prepare for future uncertainties that may arise.
While the figures in the deal appear large, Mr Josua said that the commitments are likely to be staggered over time, and may align with Indonesia's long-term infrastructure and aviation ambitions.
But whether they benefit Indonesia in the long run will depend on how they create jobs and drive productivity, and how Indonesia integrates these commitments with domestic policy objectives.
'Careful negotiation and execution will be critical to ensuring that benefits are maximised and commensurate with the substantial financial outlays involved,' he said.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
22 minutes ago
- Straits Times
US and Ukraine in talks on drone investment deal
Find out what's new on ST website and app. Ukrainian service members standing next to a deep strike unmanned aerial vehicle before its launch toward Russian territory. KYIV - Ukraine and the United States are in detailed talks on a deal involving US investment in Kyiv's domestic drone production, Ukrainian Prime Minister Yulia Svyrydenko said on July 18. The announcement comes a day after President Volodymyr Zelensky tasked a reshuffled new government with scaling up Ukraine's arms industry and strengthening ties with its strategic partners. Ms Svyrydenko, speaking to reporters alongside several other new ministers in the capital Kyiv, said the deal would also lead to the US, Ukraine's biggest military backer in its war with Russia, purchasing Ukrainian drones. 'We plan to sign a 'drone deal' with the United States. We are discussing investments in the expansion of production of Ukrainian drones by the US,' she said. 'That is, we are talking about the purchase of a large batch of Ukrainian drones.' Ms Svyrydenko added that a political decision on the deal had been made by Mr Zelensky and President Donald Trump, and that officials were already hashing out the details. Mr Zelensky told the New York Post this week that he and Mr Trump were considering a deal for Washington to buy battlefield-tested Ukrainian drones in exchange for Kyiv purchasing weapons from the US. Top stories Swipe. Select. Stay informed. Singapore Critical infrastructure in S'pore under attack by cyber espionage group: Shanmugam Singapore What is UNC3886, the group that attacked Singapore's critical information infrastructure? Singapore Alleged Kpod peddler filmed trying to flee raid in Bishan charged with 6 offences Asia Indonesia court jails former trade minister for 4½ years in sugar graft case Singapore Singapore police in contact with Indonesian authorities over baby trafficking allegations Singapore NTU upholds zero grade for student accused of using AI in essay; panel found 14 false citations or data Singapore 7-year-old girl, cabby taken to hospital after vehicle pile-up in City Hall area Singapore Former NUH male nurse charged after he allegedly molested man at hospital The Ukrainian government under Svyrydenko is expected to shore up ties with the Trump administration, which has grown increasingly critical of Russia since it stepped up air strikes on Ukraine. Ms Svyrydenko is well-known in Washington, having negotiated a high-level deal offering the US preferential access to Ukraine's mineral wealth that will feed a reconstruction fund. At the briefing in Kyiv, economy minister Oleksiy Sobolev said the board of a joint US-Ukrainian fund will meet for the first time by the end of the summer. REUTERS
Straits Times
37 minutes ago
- Straits Times
Brazil court orders raids, ankle monitor on Bolsonaro for colluding with Trump
Find out what's new on ST website and app. Ex-Brazilian president Jair Bolsonaro speaks during a press conference in front of the Federal Senate in Brasilia, Brazil, on July 17, 2025. BRASILIA - Brazil's Supreme Court issued search warrants and restraining orders against former President Jair Bolsonaro on July 18, banning him from contacting foreign officials for allegedly courting the interference of US President Donald Trump. Federal police raided Bolsonaro's home and he was ordered to wear an ankle monitor, adding to legal pressure that Mr Trump has tried to relieve with a steep tariff on Brazilian goods. The court's crackdown on Bolsonaro added to signs that Mr Trump's tactics could backfire in Brazil, compounding trouble for his ideological ally and rallying public support behind a defiant leftist government. Bolsonaro was also banned from contacting foreign officials, using social media and approaching embassies, according to the decision issued by Supreme Court Justice Alexandre de Moraes, who cited a 'concrete possibility' of him fleeing the country. He added that Bolsonaro had asked the 'head of state of a foreign nation' to interfere in the Brazilian courts, which he characterised as an attack on national sovereignty. Bolsonaro is on trial before Brazil's Supreme Court on charges of plotting a coup to stop his rival President Luiz Inacio Lula da Silva from taking office in January 2023. Bolsonaro, who governed Brazil from 2019 to 2022 and calls the case against him a political persecution, told reporters on July 18 that he never considered fleeing Brazil. He said the latest court orders were meant for his 'supreme humiliation.' Top stories Swipe. Select. Stay informed. Singapore Critical infrastructure in S'pore under attack by cyber espionage group: Shanmugam Singapore What is UNC3886, the group that attacked Singapore's critical information infrastructure? Singapore Alleged Kpod peddler filmed trying to flee raid in Bishan charged with 6 offences Asia Indonesia court jails former trade minister for 4½ years in sugar graft case Singapore Singapore police in contact with Indonesian authorities over baby trafficking allegations Singapore NTU upholds zero grade for student accused of using AI in essay; panel found 14 false citations or data Singapore 7-year-old girl, cabby taken to hospital after vehicle pile-up in City Hall area Singapore Former NUH male nurse charged after he allegedly molested man at hospital Mr Trump has in recent weeks pressed Brazil to stop the legal case against Bolsonaro, saying that his former ally was the victim of a 'witch hunt'. The US president said last week he would impose a 50 per cent tariff on Brazilian goods from Aug 1, in a letter opening with criticism of the Bolsonaro trial. Federal police are seen in front the house of the former president Jair Bolsonaro on July 18, 2025. PHOTO: REUTERS Mr Trump on July 17 shared on Truth Social a letter he sent to Bolsonaro. 'I have seen the terrible treatment you are receiving at the hands of an unjust system turned against you. This trial should end immediately!' he wrote. Mr Moraes wrote in his decision that the higher tariffs threatened by Mr Trump were aimed at creating a serious economic crisis in Brazil to interfere in the country's judiciary. Bolsonaro was also prohibited from contacting key allies including his son Eduardo, a Brazilian congressman who has been lobbying in Washington to help his father. The decision from Mr Moraes said the former president and his son had acted illegally 'to subject the functioning of the Supreme Court to the scrutiny of a foreign state, through hostile acts resulting from spurious and criminal negotiations to obstruct justice and coerce this court.' A five-judge panel of Brazil's Supreme Court is set to review Mr Moraes' orders on July 18 and decide whether to uphold them. REUTERS
Straits Times
an hour ago
- Straits Times
‘We will not be taken for fools': Under election pressure, Japan PM stands firm on trade with US
Find out what's new on ST website and app. Japanese Prime Minister Shigeru Ishiba shakes hands with US Treasury Secretary Scott Bessent, before their meeting at the Prime Minister's Office in Tokyo on July 18, 2025. – Japan's Prime Minister Shigeru Ishiba has been full of bluster during street rallies for the Upper House election on July 20, striking a note of defiance over US trade tariffs as he swore that his country 'will not be taken for fools'. The beleaguered Premier, who also faces domestic pressures, said at a rally speech in Funabashi, near Tokyo, on July 9: 'This is a battle fought over national interests. We must say what we have to say, squarely and bluntly, to our ally. We will not be disrespected.' He would later stress that Japan is 'not to be underestimated'. While Tokyo was expected to dig in its heels in trade negotiations with Washington, Mr Ishiba's comments have raised eyebrows among voters, alarmed policymakers and drawn blowback from politicians, not just those in opposition but also within his own Liberal Democratic Party (LDP). Such rhetoric may be par for the course for leaders of other security allies of the United States, such as European countries. But it is rare for any Japanese prime minister to speak out so harshly in public. Will Mr Ishiba be rewarded for his bluntness? Top stories Swipe. Select. Stay informed. Singapore Critical infrastructure in S'pore under attack by cyber espionage group: Shanmugam Singapore What is UNC3886, the group that attacked Singapore's critical information infrastructure? Singapore Alleged Kpod peddler filmed trying to flee raid in Bishan charged with 6 offences Asia Indonesia court jails former trade minister for 4½ years in sugar graft case Singapore Singapore police in contact with Indonesian authorities over baby trafficking allegations Singapore NTU upholds zero grade for student accused of using AI in essay; panel found 14 false citations or data Singapore 30% of aviation jobs could be redesigned due to AI, automation; $200m fund to support workers: CAAS Singapore Former NUH male nurse faces charges after he allegedly molested man at hospital His statements were borne out of domestic political expediency, and he struck a more conciliatory tone at an inconclusive half-hour meeting with visiting US Treasury Secretary Scott Bessent in Tokyo on July 18. Mr Ishiba said, in opening remarks, that he hoped their countries can 'continue vigorous discussions to reach an agreement that benefits both sides'. Mr Bessent replied: 'I am sure we can reach a good agreement.' The latter was leading a delegation to attend US 'National Day' festivities at the Osaka World Expo on July 19, and it is understood that no trade talks have been planned during his visit. Mr Ishiba told reporters after the meeting: 'Nothing has been fixed, including a meeting with President (Donald) Trump, but I believe there will naturally be an opportunity to talk directly with the President with our national interests on the line.' The lack of any diplomatic breakthrough will weigh on Mr Ishiba, who had been a maverick on the fringes of the LDP until he was propelled to power under the most unlikely of circumstances. This means Mr Ishiba has a weak support base within the party, and his tenuous grip on power will be further tested. He has set a target for the LDP and its coalition partner Komeito to win at least 50 seats, to defend their majority in the chamber. The ruling coalition currently holds 75 seats that are not up for election, with 125 seats of the 248-seat House under contest. Elections are held every three years for half the House seats, with members holding six-year terms. But Japanese media outlets this week have uniformly forecast that even winning 50 seats would be a tall order for the besieged leader, although this might not spell the killer blow to Mr Ishiba's incumbency . There are no clear successors within the party, as the leadership role is seen as a poisoned chalice amid feeble public support. After the Upper House polls, no national election is due until 2028, while the LDP will only hold its next leadership election in 2027 if Mr Ishiba does not resign prematurely. Holding a minority in the Upper House, however, would severely complicate policymaking given that the LDP-Komeito coalition also has a minority in the Lower House. This means the LDP will have to bend over backwards to make even more concessions than they do now to the opposition to pass legislation. The hustings have been dominated by anti-foreigner sentiment , weaponised by the far-right Sanseito. The ultra-conservative party had its origins as an anti-vaccine group but has enjoyed a meteoric rise with its unabashed 'Japanese First' slogan and its spreading of misinformation of foreigners getting preferential treatment at the expense of citizens. Sanseito has latched on to right-wing conspiracy theories propagated by Russia-affiliated social media accounts – the government on July 16 said Japan has been a 'target of foreign election interference' – claiming that Japan is facing a 'silent invasion' of foreigners and at risk of becoming an 'economic colony' given the influx of foreign investments and tourist dollars. Another dominant issue is the cost-of-living crisis, which has been epitomised by soaring rice prices . The ruling coalition has proposed cash handouts, while the opposition is promising temporary cuts to the consumption tax of varying degrees, to provide economic relief. What has not helped Mr Ishiba's quest for the LDP's electoral victory is Mr Trump's July 7 salvo, which came days into the election hustings, that Japan will face a 'reciprocal' tariff of 25 per cent from Aug 1. This marked a one percentage point increase from the proposed rate in April, and is separate from sectorial duties already in force for cars and car parts, as well as steel and aluminium. Mr Trump has placed squarely in his crosshairs Japan's sacred cows of rice and cars, which Mr Ishiba has described as areas of national interest. Mr Trump wants Japan to import more American rice and cars. As the clock winds down on the Aug 1 deadline, Mr Trump on July 15 again bashed Japan for refusing to open up trade barriers, hinting that Tokyo was nowhere close to negotiating down the tariffs. He said: 'I think probably we will live by the letter with Japan.' Geoeonomics expert Saori Katada of University of Southern California told The Straits Times: 'Trump is not playing a bilateral game, so whatever Japan has done would not have worked.' 'The deeper the interdependence, the more effectively coercion hits,' she said, noting that a US-Japan trade agreement was already brokered between Mr Trump and then-prime minister Shinzo Abe in 2019. 'Given the existing trade deal, Japan has not much to give to the US,' she said. Dr Sota Kato, a former Japanese trade negotiator, told ST that Tokyo's belief – that it was a valued ally with a special relationship with the US, which would grant it a fast track to a deal – was misplaced. 'Japan has been sticking to a stance grounded in principle, rather than pragmatism, in this negotiation. While such an approach worked reasonably well in past bilateral negotiations with the US, it doesn't seem to be effective this time,' he said. 'If Japan is to strike a deal, it will need to move beyond rigid principles and seek practical concessions, including the reduction of some non-tariff trade barriers.' Dr Kato, who is now a research director at The Tokyo Foundation for Policy Research think-tank, pointed to inexperience for the current lack of success. Chief trade negotiator Ryosei Akazawa has visited Washington seven times without tangible results, which was 'highly unusual'. 'It appears that Akazawa may have only engaged at the bureaucratic preparatory-level, rather than taking true political initiative,' he said. 'Ishiba's limited political network is having a noticeable impact.' He felt that it would be very difficult for Mr Ishiba to reverse course and offer heavy concessions even after the election. 'If the Ishiba administration were to abruptly shift its stance, it would likely face strong criticism from farmers and the auto industry. That makes such a reversal politically difficult,' he said. The impasse with the US boiled down to a 'lack of leadership to make tough and swift decisions', he added.
