The US-Indonesia Trade Deal

IT is called a reciprocal tariff. Yet the trade agreement with the United States signed by President Prabowo Subianto and President Donald Trump on Thursday, February 19, 2026, is far from reciprocal. In the 45-page document, the provisions imposing obligations on Indonesia far outnumber those binding the United States.

In principle, a trade deal should place two countries on equal footing, including in its implementation. Indonesian goods enter the United States tariff-free and American goods receive the same treatment here. But beyond the substance, Indonesia’s position has been inferior from the outset.

First, there is the Rp17 trillion “tribute” Indonesia will present to the Board of Peace (BOP), an entity established by Donald Trump. The stated purpose of the board is to promote peace and rebuild Gaza in Palestine. Yet Trump dropped Gaza from the board’s name when he announced it at the World Economic Forum in Davos, Switzerland, on January 22, 2026.

In fact, the Rp17 trillion would be payable only if Indonesia sought permanent membership on the Board of Peace after three years. But Prabowo has already announced he will pay the contribution well before it comes due. He argued that Indonesia’s membership in the board would ease negotiations over import tariffs for Indonesian goods entering the United States.

In reality, Indonesia faced far more pressure at the negotiating table. The import tariff remains at 19 percent. True, that figure fell from 32 percent. But the rate was agreed upon when Prabowo spoke by phone with Trump on July 15, 2025. In other words, without joining the BOP, Indonesia had already secured that tariff level.

Second, Indonesia receives tariff reductions for only 1,819 categories of goods—just 50.1 percent of its total exports to the United States. By contrast, the United States gains tariff exemptions on 99 percent of the goods it exports to Indonesia.

Third, the agreement contains numerous technical clauses that tilt heavily to one side. You can read a more detailed account in this week’s cover story. We examine several critical aspects of the deal that undermine the broader architecture of Indonesia’s economy and financial system. Many other elements remain unexplored. We will address them in a series of daily follow-up articles.

In other words, the so-called reciprocal agreement is anything but reciprocal, though from a consumer standpoint, it offers certain benefits. With tariff and non-tariff barriers removed, American goods will enter the Indonesian market at lower prices. Indonesian products, however, will cost more when sold in Manhattan.

The agreement also abolishes the quota regime that has long served as fertile ground for corruption and rent-seeking. Quotas allow traders to manipulate prices when demand rises. As a result, consumers often bear the cost, paying higher prices due to corrupt supply chains and market manipulation.

Beyond these issues, the legal foundation of Donald Trump’s import tariffs has already eroded after the United States Supreme Court struck them down. In a ruling issued a day after the signing of the trade agreement with Indonesia, the Court declared that Trump lacked constitutional authority to impose import tariffs on other countries. In response, Trump reinstated a blanket 10 percent tariff on all nations.

The ball is now in the Indonesian government’s court. Under Article 7.2, the government may submit a notice of termination within 30 days. If it does so, the agreement will be void. Otherwise, the beneficial provisions—such as the elimination of quotas and other non-tariff barriers—should be implemented domestically to make the economy more efficient and less costly.