Prabowo, Trump Have Struck a Trade Deal — But at What Cost to Indonesia?

Pact Seen by Some as a Diplomatic Win, but Others Warn About the Costly Commitments

- Hariz Baharudin

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 percent, 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 UK. The US President had threatened Indonesia with a 32 percent tariff rate starting on 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.

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.