EU, Indonesia ink trade deal after years of talks
The economic agreement would remove duties on labor-intensive sectors such as footwear, textiles, garments, palm oil, fisheries, renewable energy and electric vehicles.
Indonesia and the European Union have signed a long-awaited trade deal that comes as Asian countries reposition themselves in a landscape reshaped by U.S. tariffs.
The pact, which Jakarta and the EU have been negotiating for over nine years, was inked Tuesday during European Commissioner for Trade & Economic Security Maroš Šefčovič’s visit to Indonesia.
“This agreement eliminates over 98% of tariffs, removing nearly all barriers to trade and opening new pathways for investment," the European official said.
That will benefit labor-intensive sectors such as footwear, textiles, garments, palm oil, fisheries, renewable energy and electric vehicles, said Haryo Limanseto, a spokesperson for Indonesia’s ministry of economic affairs.
In a statement, Šefčovič said the agreement had been crafted to ensure “a balanced outcome." For one, Indonesia will gradually reduce its tariff on imported cars, opening the door for EU auto exports and investment in electric vehicles, among others, the commissioner said.
“EU exporters alone stand to save more than 600 million euros in customs duties on goods shipped to Indonesia," he said, adding that the agreement helps secure critical raw materials for green and digital technologies.
Indonesia, a top producer of key commodities like nickel and copper, expects the agreement to double bilateral trade within five years as the Southeast Asian country gains wider access to the trading bloc’s 27-member market.
The EU is Indonesia’s fifth-largest trading partner, with trade between the two sides reaching reached over 27 billion euros last year, equivalent to about US$32.22 billion.
Since the Trump administration announced tariffs on dozens of trading partners, more nations in export-reliant Asia have been making moves to help soften the economic blow and adapt to the new trade environment.
Asian countries are strengthening ties with non-U.S. partners, and rolling out reforms and stimulus at home to boost growth, DBS senior economist Radhika Rao said in a note.
Thailand, the Philippines and Malaysia are also in talks with the EU, while China and the Association of Southeast Asian Nations earlier this year completed negotiations to upgrade their trade pact.
Officials are aiming to ratify the trade pact by Jan. 1, 2027, Airlangga Hartarto, Indonesia’s coordinating minister for economic affairs, said at a signing ceremony Tuesday, adding that Jakarta is looking forward to strengthening the supply chain with Europe, including for critical minerals, renewable energy and investment.
By finalizing the agreement, the EU and Indonesia are sending a “powerful message to the world that we stand united in our commitment to open rules-based and mutually beneficial international trade," Šefčovič said at the ceremony.
Write to Ying Xian Wong at yingxian.wong@wsj.com and Amanda Lee at amanda.lee@wsj.com
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