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

Indonesia and the United States finalized a trade deal in Washington on February 20, 2026, reducing US tariffs on Indonesian goods from 32% to 19%, with Jakarta securing tariff exemptions for its top export palm oil and other commodities amid ongoing market challenges for the Southeast Asian nation. The agreement was signed by Indonesia's senior economic minister Airlangga Hartarto and U.S. Trade Representative Jamieson Greer after months of negotiations, with Hartarto describing the deal as a 'win-win' that respects the sovereignty of both countries. Palm oil, which accounts for approximately 9% of Indonesia's overall exports, was a particularly important concession, alongside other key commodities including coffee, cocoa, rubber, and spices that will now enter the US market tariff-free. The 19% tariff rate brings Indonesia in line with other Southeast Asian nations such as Malaysia, Cambodia, Thailand, and the Philippines in their trade agreements with the US, though Vietnam maintains a slightly higher rate of 20%. The deal comes at a critical time for Indonesia, which has faced economic headwinds in early 2026, including a potential downgrade by index provider MSCI to 'frontier' market status over transparency concerns and a reduced credit rating outlook from Moody's citing policy unpredictability. Analysts suggest the agreement could help restore investor confidence if Indonesia uses it as a foundation for further economic reforms, as noted by Yose Rizal Damuri, executive director of CSIS Indonesia. Beyond tariff reductions, the agreement includes several significant provisions that impact both economies. Under the deal, Indonesian textile products will face a 0% levy under a quota mechanism based on the quantity of US materials like cotton and man-made fiber used in production. The US withdrew requests for non-economic provisions related to nuclear reactor development and the South China Sea, while Indonesia committed to removing most tariff barriers on US products across all sectors and accepting American product standards for vehicles, emissions, medical devices, and pharmaceuticals. The agreement also addresses strategic concerns regarding critical minerals, with Indonesia agreeing to restrict 'excess production' by foreign-owned facilities in sectors including nickel, cobalt, bauxite, copper, and manganese, while facilitating US investment in these resources. Indonesian President Prabowo Subianto traveled to Washington to finalize the deal and participate in the first leaders' meeting of U.S. President Donald Trump's Board of Peace, with both leaders signing a document titled 'Implementation of the Agreement Toward a NEW GOLDEN AGE for the U.S.-Indonesian Alliance.' The trade deal is scheduled to take effect 90 days after both countries complete legal procedures, and follows $38.4 billion in business agreements signed between Indonesian and US companies during the same visit.