Indonesia Proposes Negotiation Points to the U.S. Over 32% Import Tariff

April 10, 2025 | 08:45 pm

TEMPO.CO, Jakarta - The Indonesian government has proposed several points for negotiation in response to the United States imposing a reciprocal import tariff of 32 percent on products originating from Indonesia. President Donald Trump has announced a 90-day postponement of the reciprocal tariffs' implementation.

Coordinating Minister for the Economy, Airlangga Hartarto, stated that the negotiation proposal has been received by the U.S. government. Airlangga conveyed this information to President Prabowo Subianto during an economic dialogue with business leaders and investors held at Menara Mandiri in Sudirman, Jakarta, on Tuesday, April 8, 2025.

The letter was submitted to the United States Trade Representative (USTR) and the Secretary of Commerce. "We have reported that Indonesia's letter has been sent and received by the United States through our Indonesian ambassador. Today, the American ambassador has requested time for further discussions," Minister Airlangga announced on April 8, 2025.

The Indonesian government has put forward several key negotiation points for the United States to consider. Among these is a commitment to increase the volume of imports from the U.S. to reduce the trade deficit that the U.S. currently experiences with Indonesia.

The U.S. Trade Representative (USTR) reports that the American trade balance with Indonesia showed a deficit of US$17.9 billion in 2024. This represents an increase of 5.4 percent, or US$923 million, from 2023. This trade imbalance is cited as one of the primary reasons for the imposition of the 32 percent tariff on Indonesian goods entering the U.S.

Minister Airlangga described this step as a crucial part of the negotiation strategy. "Of course, we will increase our purchase volume to facilitate a reduction in the US$18 billion trade deficit," he said during a press conference at his office on Monday, April 7, 2025.

According to him, the President has also agreed to increase purchases of U.S. agricultural products, such as soybeans and wheat, which are not produced domestically, to help maintain a more balanced trade relationship. Additionally, the government intends to purchase Liquefied Petroleum Gas (LPG) and Liquefied Natural Gas (LNG) from the U.S.

Another significant negotiation point involves the potential relaxation or easing of the Local Content Requirement (TKDN) obligations, which have been a source of concern for the U.S. The government plans to bring this issue to the negotiation table. "This is among the requests made by America, on Information and Communication Technology (ICT) within the TKDN framework, particularly for American investments on Batam Island," Airlangga explained.

The proposed relaxation of TKDN would apply to the ICT sector for U.S. companies such as GE, Apple, Oracle, and Microsoft. Previously, Airlangga mentioned that another negotiation tactic was to advocate for the revitalization of the Indonesia-US Trade and Investment Framework Agreement (TIFA), which has been in effect since 1996. According to him, many aspects of the current agreement are outdated, and efforts will be made to include more relevant policies within the revised framework.

Meanwhile, Finance Minister Sri Mulyani Indrawati has indicated that President Prabowo has prepared a series of deregulation measures. One of these measures includes simplifying tax administration processes.

Furthermore, the government will adjust the import duty rates for products originating from the U.S. that are classified under the Most Favored Nation (MFN) status. These rates will be reduced from the original range of 5 percent to 10 percent down to 0 percent to 5 percent. "This means a further reduction of the tariff burden by 5 percent, for products originating from the U.S. that fall under the MFN category," Sri elaborated on Tuesday, April 8, 2025.

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