U.S. and Indonesia Agree on Framework for Reciprocal Trade Agreement

Trade Update • July 24, 2025

Key Points

• Indonesia will eliminate about 99% of tariffs on U.S. industrial, food, and agricultural exports.

• The U.S. will reduce tariffs on Indonesian goods up to 19%, with possible further cuts on some products.

• The deal aims to remove non-tariff barriers and improve cooperation on regulations and digital trade.

• Indonesia commits to stronger labor rights, environmental protections, and economic security cooperation.

The U.S. and Indonesia have agreed on a framework to negotiate a reciprocal trade agreement that will open markets and reduce trade barriers for both countries. This builds on decades of cooperation, including the 1996 Trade and Investment Framework Agreement. The goal is to create new opportunities for exporters and investors while promoting fair and sustainable trade.

Key Terms of the Reciprocal Trade Agreement

Tariffs

• Indonesia will remove tariffs on about 99% of U.S. industrial, food, and agricultural exports. 

• The U.S. will lower tariffs on Indonesian products to 19%, with possible further reductions on some goods. 

Trade Rules & Barriers

• Both countries will develop clear rules of origin to ensure benefits go mainly to their own exporters. 

• Indonesia will remove local content rules and licensing requirements that block U.S. exports. 

• Indonesia will accept U.S. motor vehicle safety and emissions standards, and recognize FDA approvals for medicines and medical devices. 

• The agreement simplifies product labeling and inspections. 

• Intellectual property protections will be strengthened. 

Food and Agriculture

• Indonesia will remove import licensing and commodity balance rules that limit U.S. food and agricultural exports. 

• It will recognize U.S. regulatory oversight for meat, poultry, dairy, and plant products to ease trade. 

Digital Trade

• Indonesia will allow free transfer of personal data to the U.S. 

• It will remove tariffs on digital goods and support a permanent WTO moratorium on customs duties on electronic transmissions. 

• Digital services regulations will be improved. 

Labor and Environmental Protections

• Indonesia will ban imports of goods made with forced or compulsory labor. 

• It will strengthen labor laws protecting workers’ rights to organize and bargain collectively. 

• Enforcement against illegal logging, overfishing, and wildlife trafficking will increase. 

• WTO fisheries subsidy rules will be adopted. 

• Sustainable resource use will be promoted. 

Economic Security

• Indonesia will address steel sector overcapacity and join the Global Forum on Steel Excess Capacity. 

• Both countries will work on supply chain resilience, export controls, investment security, and combat duty evasion. 

• Export restrictions on critical minerals and industrial commodities will be removed. 

Forthcoming Commercial Deals

The U.S. and Indonesia have also agreed on the following major upcoming business deals: 

• Procurement of aircraft valued at $3.2 billion 

• Purchase of agricultural products, including soybeans, soybean meal, wheat, and cotton, totaling $4.5 billion 

• Purchases of energy products such as liquefied petroleum gas (LPG), crude oil, and gasoline, with an estimated value of $15 billion 

The two countries will finalize the detailed terms of the Reciprocal Trade Agreement in the coming weeks.

How GHY Can Help?

GHY specializes in helping businesses navigate and reduce the impacts of tariffs through strategic solutions tailored to their needs. Our experts can audit your supply chain to identify inefficiencies, uncover cost-saving opportunities, and ensure compliance with evolving trade regulations. We also employ tariff engineering techniques to optimize product classification and sourcing strategies, minimizing duty exposure and maximizing profitability.

By partnering with GHY, your business gains access to the tools and expertise needed to streamline operations and stay competitive in a challenging trade environment.

Contact Us Today! Booking a Meeting, email consult@ghy.com, or call +1 (800) 667-0771.