Trump Seals Indonesia Trade Deal, EU Braces for Tariffs

Advanced | July 20, 2025

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Landmark Indonesia Deal Reached

Trump Indonesia Trade Deal: Lower Tariff Than Expected

Former U.S. President Donald Trump made headlines on July 15, 2025, by announcing a significant new trade agreement with Indonesia. This Trump Indonesia trade deal marks a major shift in bilateral trade relations. This deal sets a 19% tariff on Indonesian goods imported into the United States, a rate notably lower than the 32% tariff initially threatened under Trump’s broader “Liberation Day” trade policy. This policy generally imposes a 10% baseline tariff on most imports, with higher rates targeting countries exhibiting substantial trade deficits with the U.S.

Major U.S. Exports and Commitments

The core of this bilateral agreement is Indonesia’s commitment to substantial purchases from the United States. These include a remarkable $15 billion in energy products, $4.5 billion in agricultural goods, and an order for 50 Boeing jets. In return for these concessions, U.S. exports to Indonesia will enjoy tariff-free access. A crucial provision within the deal also aims to prevent the transshipment of goods from other nations, particularly China, through Indonesia into the U.S. market.

Positive Reception Despite Deficit

Indonesian President Prabowo Subianto lauded the agreement, describing it as ushering in a “new era of mutual benefit.” This optimistic outlook comes despite the fact that the U.S. recorded a $17.9 billion goods trade deficit with Indonesia in 2024, highlighting the complex dynamics at play in such negotiations.

EU Prepares Countermeasures Amid Tariff Threats

EU Faces Renewed Tariff Pressure

Concurrently, the European Union finds itself in a precarious position, grappling with Trump’s intentions to implement a steep 30% tariff on the majority of EU imports, set to commence on August 1, 2025. The EU had previously paused its own retaliatory tariffs, which were originally proposed in response to earlier U.S. duties on steel and aluminum, in a strategic effort to pursue a negotiated resolution.

EU Ministers Take a Firm Stance

However, recent developments suggest patience is wearing thin across the Atlantic. EU trade ministers have publicly declared Trump’s latest tariff threat “unacceptable” and are now actively preparing a robust package of countermeasures. This package is expected to include tariffs on 72 billion euros (equivalent to $84 billion) worth of U.S. goods, potentially targeting iconic American exports such as cars and bourbon. It’s worth noting the significant trade imbalance here: the U.S. recorded a $236 billion goods trade deficit with the EU in 2024, out of a total two-way goods trade amounting to $976 billion.

Businesses Call for Stability

The escalating trade dispute has prompted urgent calls from European businesses for de-escalation and the restoration of a stable transatlantic trade relationship. The uncertainty casts a shadow over global commerce, with implications extending far beyond the immediate parties involved.

Vocabulary

tariff (noun): A tax or duty to be paid on a particular class of imports or exports.
- Example: “The new trade deal sets a 19% tariff on Indonesian goods entering the U.S.”
threatened (verb): Stated an intention to take hostile action against someone in retribution for something done or not done.
- Example: “Trump had threatened a much higher 32% tariff under his previous policy.”
imposed (verb): Forced (an unwelcome decision or policy) on someone.
- Example: “His ‘Liberation Day’ trade policy broadly imposed a 10% baseline tariff on most imports.”
substantial (adjective): Of considerable importance, size, or worth.
- Example: “Indonesia committed to substantial purchases from the U.S., including $15 billion in energy.”
transshipment (noun): The shipment of goods or containers to an intermediate destination, then to another destination.
- Example: “The deal includes provisions to prevent transshipment of goods from other countries, particularly China.”
lauded (verb): Publicly acclaimed or praised.
- Example: “Indonesian President Prabowo Subianto lauded the deal as marking a ‘new era of mutual benefit.'”
deficit (noun): The amount by which something, especially a sum of money, is too small.
- Example: “The U.S. had a $17.9 billion goods trade deficit with Indonesia in 2024.”
concurrently (adverb): At the same time.
- Example: “Concurrently, the European Union is contending with Trump’s plans to implement a 30% tariff.”
retaliatory (adjective): Characterized by a desire for revenge; punitive.
- Example: “The EU has delayed its own retaliatory tariffs, initially proposed in response to earlier U.S. duties.”
de-escalation (noun): The process of reducing the intensity of a conflict or potentially violent situation.
- Example: “European businesses have called for de-escalation and a stable transatlantic trade relationship.”

Discussion Questions (About the Article)

What was the “Liberation Day” trade policy, and how did the Indonesia deal differ from its general principles?
Beyond the tariff rate, what specific commitments did Indonesia make as part of the new trade agreement with the U.S.?
How does the U.S. trade deficit with Indonesia compare to its trade deficit with the European Union in 2024?
What is the European Union’s current strategy regarding the impending U.S. tariffs, and why have they delayed their own retaliatory measures?
What concerns are European businesses expressing, and what kind of trade relationship are they hoping for?

Discussion Questions (About the Topic)

In your opinion, what are the potential long-term benefits or drawbacks of bilateral trade deals like the one signed with Indonesia?
How might the U.S. “Liberation Day” trade policy affect global trade relations if widely implemented across various countries?
Discuss the role of tariffs in international trade. Are they effective tools for addressing trade imbalances, or do they primarily create new problems?
What are some potential economic or political consequences if the trade dispute between the U.S. and the EU escalates further?
How do you think countries can best achieve a “new era of mutual benefit” in trade, especially when significant trade deficits exist, as seen with Indonesia and the EU?

Related Idiom

At loggerheads

Meaning: In dispute or disagreement; quarreling.
Example: “The U.S. and the EU appear to be at loggerheads over trade policy, with both sides preparing for potential tariff escalations.”

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This article was inspired by: Yahoo Finance | July 16 2025