A U.S. trade agreement with Indonesia, finalized in July 2025, is reportedly at risk of collapse due to Indonesia’s apparent backtracking on key commitments, according to a U.S. official speaking on condition of anonymity. The official confirmed that Jakarta is reneging on aspects of the deal, although specific details of the contested commitments were not disclosed.

Background of the Trade Agreement

The trade deal, first announced by U.S. President Donald Trump on July 15, was described as “a huge win for our automakers, tech companies, workers, farmers, ranchers, and manufacturers.” Under the agreement:

• Indonesia pledged to eliminate tariffs on more than 99% of U.S. goods.
• Non-tariff barriers affecting U.S. businesses in Indonesia were to be removed.
• The United States agreed to reduce threatened tariffs on Indonesian products from 32% to 19%.

The deal was expected to significantly enhance bilateral trade, strengthen economic ties, and encourage U.S. investment in Indonesia’s industrial and agricultural sectors.

Current Standoff

U.S. officials claim that Indonesia is now refusing to accept some binding commitments included in the July agreement. Jakarta reportedly wants to reframe these commitments, raising concerns in Washington that any renegotiated terms could be less favorable than similar deals the U.S. has signed with Malaysia and Cambodia.

Financial Times sources indicate that Indonesia may be “backsliding” on eliminating non-tariff barriers affecting U.S. exports and on its obligations regarding digital trade.

Indonesia’s Response

Indonesian officials, however, maintain that talks are ongoing and that no major issues have arisen during negotiations. Haryo Limanseto, spokesperson for Indonesia’s Ministry for Economic Affairs, emphasized that “dynamics in the negotiation process are normal” and expressed hope that a mutually beneficial agreement would be reached soon.

Minister Airlangga Hartarto, who leads Indonesia’s tariff negotiations with the U.S., confirmed that the process is focused on harmonizing the language of the agreement to ensure clarity for both sides.

U.S. Concerns

U.S. Trade Representative Jamieson Greer has reportedly been informed that Indonesia cannot agree to certain binding commitments in the trade deal. Meanwhile, Treasury Secretary Scott Bessent previously described Indonesia as “getting a little recalcitrant,” highlighting growing frustration in Washington over potential setbacks.

The potential collapse of the trade agreement has raised concerns in U.S. business circles, particularly among tech companies and manufacturers, who had anticipated expanded market access and reduced tariffs for exports to Indonesia.

Implications for U.S.-Indonesia Trade

If the deal falters:

• U.S. exporters could face higher tariffs and continued non-tariff barriers, particularly in industrial and agricultural sectors.
• Digital trade commitments may be delayed, impacting technology investments and data flow agreements.
• Bilateral trade growth may lag behind agreements with other Southeast Asian nations, including Malaysia and Cambodia.

The situation remains fluid, with ongoing negotiations critical to salvaging the deal and maintaining strong economic relations between the U.S. and Indonesia.