Indonesia secures 19% tariff deal with US, palm oil and other commodities exempt

The pact was signed in Washington by Indonesia’s senior economic minister Airlangga Hartarto and US Trade Representative Jamieson Greer, following months of talks.

“This deal respects the sovereignty of both countries,” Airlangga said at an online press conference, calling it a “win-win” for both sides.

Palm oil was a key carve-out, making up about 9% of Indonesia’s total exports.

Airlangga said Indonesian coffee, cocoa, rubber and spices would also enter the United States tariff-free.

The 19% rate matches US arrangements with Southeast Asian competitors, including Malaysia, Cambodia, Thailand and the Philippines, while Vietnam faces a slightly higher rate of 20%.

Malaysia, another major palm oil exporter, has also secured tariff-free access for palm oil, as well as for cocoa and rubber.

The deal follows a difficult start to 2026 for Indonesian markets.

Recent setbacks include a warning last month from index provider MSCI that Indonesia’s equity market could be downgraded to “frontier” status over transparency issues, and Moody’s decision two weeks ago to cut the country’s credit rating outlook, citing reduced predictability in policymaking.

Investor sentiment could improve if Jakarta treats the US agreement as a platform for broader reforms, said Yose Rizal Damuri, executive director of CSIS Indonesia.

“If Indonesia could multilateralize some of its commitments to the United States and use them as a basis for deregulation, that would increase trust in Indonesia, and that's something that should be taken advantage of, optimised,” he added.

Under the agreement, Indonesian textile products will face a 0% levy under a quota system that has yet to be finalised.

The quota will be tied to how much US-sourced material, such as cotton and man-made fibre, is used in the textiles.

Airlangga said the United States dropped requests to include non-economic provisions, including those linked to nuclear reactor development and the South China Sea.

In exchange, Indonesia will lift tariff barriers on most US goods across all sectors and tackle non-tariff obstacles, such as local content requirements, according to a White House fact sheet.

Indonesia will also accept US product standards covering vehicle safety, emissions, medical devices and pharmaceuticals.

The agreement also appears to address concerns in Washington, highlighted by analysts, over China’s dominance in many critical minerals and the shifting of Chinese business operations to countries such as Indonesia.

As part of the deal, Indonesia will introduce curbs on “excess production” at foreign-owned mineral processing facilities by ensuring output aligns with Indonesian mining quotas.

The minerals cited include nickel, cobalt, bauxite, copper and manganese.

Jakarta also agreed to act against firms owned or controlled by foreign countries operating in Indonesia when their practices harm US trade interests.

Indonesia will facilitate US investment in critical minerals and energy resources, and will work with US companies to speed up development of its rare-earth sector.

Airlangga said the agreement is expected to take effect 90 days after both sides complete the necessary legal steps, adding that adjustments remain possible if both parties agree.

President Prabowo Subianto has travelled to Washington for the deal and to attend the first leaders’ meeting of US President Donald Trump’s Board of Peace.

Prabowo and Trump signed a document titled “Implementation of the Agreement Toward a NEW GOLDEN AGE for the US-Indonesian Alliance” on Friday (February 20), which the White House said would help both countries strengthen economic security and growth.

Earlier this week, Indonesian and US companies also signed agreements worth $38.4 billion.

Reuters