Indonesia Offers to Purchase $34 Billion in US Goods Ahead of Tariff Deadline

The Diplomat

2 days ago

It remains to be seen whether the agreement, set to be signed next week, will secure a significant reduction in the 32 percent 'reciprocal' tariff.
Indonesia's government will next week sign a multibillion-dollar agreement to boost purchases from the United States in a bid to strike a trade agreement with Washington ahead of its tariff deadline.
Speaking to journalists yesterday, Airlangga Hartato, the coordinating minister for economic affairs, said that the memorandum of understanding will deploy $34 billion 'for new Indonesian investments and purchases in the United States,' Reuters reported. He said that the agreement will be signed on July 7, two days before the Trump administration's sweeping 'reciprocal tariffs' are due to come into effect.
According to the Jakarta Globe, the deal includes 'significant purchases of energy and agricultural commodities, as well as investment plans involving Indonesia's sovereign wealth fund, Danantara.'
Airlangga told reporters that the value of the energy purchases could reach as high as $15.5 billion,
'This shows that government, regulators, state-owned enterprises and the private sector are together in responding to the imposition of U.S. reciprocal tariffs,' he added.
Airlangga said that the aim of the deal is to help address the U.S. trade deficit with Indonesia, which currently stands at around $19 billion, up from $17.9 billion last year.
The trade deficit provided the mathematical basis for the calculation of the 32 percent tariff that President Donald Trump imposed on Indonesia during his 'liberation day' tariff announcement on April 2.
Indonesia is hoping that the multibillion-dollar pledge will lead the U.S. to reduce, if not eliminate, the tariff. 'We're offering to purchase goods worth more than what the U.S. trade deficit is – $34 billion in total, compared to the $19 billion deficit,' Airlangga said.
Reuters also reported that the Indonesian flag carrier Garuda Indonesia is in talks to buy up to 75 jets from Boeing, possibly including 737 Max 8 and 787 jets. The firm's chief executive Wamildan Tsani made the announcement after a meeting with Airlangga, but according to Reuters, it 'was unclear whether Garuda's discussion with Boeing is part of the tariff negotiations,' nor whether this deal is included within the $34 billion. Earlier this week, Airlangga said that Jakarta has invited U.S. firms to invest in its critical minerals sector, in collaboration with the Danantara fund. He added yesterday that the two countries are 'looking to expand' their collaboration in the mining sector, although he declined to discuss specific project details.
As the clock runs down to July 9, trade partners of the U.S. – including many in Southeast Asia – are hurriedly trying to broker deals to avoid the full impact of the 'reciprocal' tariffs, or secure a further extension of the 90-day postponement. The White House has suggested that those doing so in 'good faith' could receive an additional delay on tariffs.
Most Southeast Asian nations were hit with a hefty tariff in Trump's 'liberation day' tariff announcement on April 2. Cambodia topped the list with a tariff of 49 percent, followed by Laos (48 percent), Vietnam (46 percent), Myanmar (44 percent), Thailand (36 percent), Indonesia (32 percent), Brunei (24 percent), Malaysia (24 percent), and the Philippines (17 percent). Singapore and Timor-Leste, the only two Southeast Asian nations with which the U.S. has a trade surplus, were hit with just the 10 percent worldwide baseline tariff.
Vietnam yesterday became the first Southeast Asian nation, and the second in the world after the United Kingdom, to sign a tariff deal with the U.S. ahead of the July 9 deadline. According to announcements by President Trump and the Vietnamese government, the deal involves a reduction of its 46 percent reciprocal tariff to 20 percent, while Vietnam has agreed to lower import barriers to U.S. exports to zero. The U.S. will also maintain a 40 percent tariff on goods from China transhipped via Vietnam to avoid other tariffs – although how this status will be determined is unclear, and could come back to sting Hanoi.
Since April, Indonesia has made a number of offers to the U.S. in tariff negotiations. Last week, Airlangga said that the government would ease import regulations on 10 groups of commodities within two months, including fertilizers, footwear, and bicycles, while excluding industrial raw materials like plastic and chemical products from the import restriction list.
Jakarta has also proposed relaxing some of its local content requirements, which set quotas for the use of locally produced content. In particular, the government has proposed reducing the requirement on government procurements that will permit any state ministry and institution to buy products with 25 percent locally produced content, down from the current minimum of 40 percent.
Both of these issues were among the non-tariff barriers identified by the U.S. Trade Representative in a report published in late March as contributors to the country's large trade surplus with the U.S.