President Donald Trump on Tuesday announced that the United States will impose a 19% tariff on goods from Indonesia as part of a new agreement with the Southeast Asian nation, adding that more such deals are on the way, along with new details on proposed tariffs on pharmaceuticals.
Trump announced the pact with Indonesia, a relatively minor US trading partner, as he continued to press for what he views as better terms with trading partners and ways to shrink a huge US trade deficit. Letters setting tariff rates for dozens of smaller countries were also coming soon, he said on Tuesday.
The deal with Indonesia is among the handful struck so far by the Trump administration ahead of an August 1 deadline when duties on most US imports are due to rise again. The accord came as the top US trading partner – the European Union – readied retaliatory measures should talks with Washington fail.
As that deadline approached, negotiations were under way with other nations eager to avoid more US levies beyond a baseline 10% on most goods that has been in place since April.
Chaotic Roll-out
Trump’s roll-out of the policies has often been chaotic. His moves have upended decades of negotiated reductions in global trade barriers, unsettling international financial markets and threatening a new wave of inflation.
Trump’s recent tariff announcements will raise the US’s average effective tariff rate to 20.6%, up from 2–3% before January, according to Yale Budget Lab. Even with consumption shifts, it would fall only to 19.7%—still the highest since 1933.
Trump also outlined a trade deal with Indonesia, similar to one with Vietnam, imposing a flat 19% tariff on Indonesian exports, no duties on US exports, penalties for Chinese transhipments, and a commitment from Indonesia to purchase selected US goods.
‘We Are Going To Pay Nothing’
“They are going to pay 19% 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,” Trump said outside the Oval Office. Trump later said on his Truth Social platform that Indonesia had agreed to buy $15 billion of US energy products, $4.5 billion of American farm products and 50 Boeing, though no time frame was specified.
He told reporters the deal with Vietnam was “pretty well set” but said it was not necessary to release details.
Growing Trade
Indonesia’s total trade with the US – totalling just under $40 billion in 2024 – does not rank in the top 15, but it has been growing. US exports to Indonesia rose 3.7% last year, while imports from there were up 4.8%, leaving the US with a goods trade deficit of nearly $18 billion.
The top US import categories from Indonesia, according to US Census Bureau data from the International Trade Centre’s TradeMap tool, last year were palm oil, electronics equipment including data routers and switches, footwear, car tires, natural rubber and frozen shrimp.
Susiwijono Moegiarso, a senior official with Indonesia’s Coordinating Ministry for Economic Affairs, told Reuters in a text message: “We are preparing a joint statement between US and Indonesia that will explain the size of reciprocal tariff for Indonesia including the tariff deal, non-tariff and commercial arrangements. We will inform (the public) soon.”
Trump last week threatened Indonesia with a 32% tariff from August 1 in a letter to its president. Similar letters went to about two dozen countries, including Canada, Japan, and Brazil, outlining tariffs of 20% to 50%, plus 50% on copper. In Pittsburgh, Trump backed blanket tariffs, though his top officials prefer negotiating more trade deals.
Upon his arrival back in Washington, Trump told reporters that letters would be going out soon for many smaller countries, suggesting they would face a tariff of “a little over 10%”.
‘Very High Tariff’
He said his administration would also announce tariffs on pharmaceuticals imported into the United States, probably at the end of the month, starting with what he called a low tariff rate to give companies time to move manufacturing to the US before imposing a “very high tariff” in a year or so.
The August 1 deadline gives targeted countries time to negotiate about lower tariff rates. Some economists have also noted Trump’s pattern of backing off his tariff threats.
Since launching his tariff policy, Trump has clinched only a few “framework” agreements, falling short of earlier promises to land “90 deals in 90 days”.
So far, such deals have been reached with the United Kingdom and Vietnam, and an interim deal has been struck with China to forestall the steepest of Trump’s tariffs while negotiations continue between Washington and Beijing.
Trump said talks with India were moving “along that same line,” saying the agreement would give US firms access to the large Indian market.
EU Readies Retaliation
The breakthrough with Indonesia came as the European Commission, which oversees trade for the EU, prepared to target 72 billion euros ($84.1 billion) worth of US goods – from Boeing aircraft and bourbon whiskey to cars – for possible tariffs if trade talks with Washington fail.
Trump has threatened a 30% tariff on imports from the EU from August 1, a level European officials say is unacceptable and would end normal trade between two of the world’s largest markets.
The list, sent to EU member states and seen by Reuters on Tuesday, pre-dated Trump’s move over the weekend to ramp up pressure on the 27-nation bloc and responded instead to US duties on cars and car parts and a 10% baseline tariff.
The package also covers chemicals, medical devices, electrical and precision equipment as well as agriculture and food products – a range of fruits and vegetables, along with wine, beer and spirits – valued at 6.35 billion euros.
(With inputs from Reuters)
