Indonesia’s trade deal with the US is at risk of collapsing, with Jakarta reportedly backtracking on some commitments it made as part of the agreement reached in July.
Commitments that Indonesia is reneging on include those related to critical minerals, as the government fears these could limit its autonomy and affect its ties with China and Russia, reported Bloomberg, citing familiar sources.
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Since the agreement in July, which set a 19% tariff rate, the US has reportedly been pressing Indonesia to accept terms that may limit its engagement with China, a significant foreign investor.
The impasse has led to tensions with Washington, raising the possibility that the agreement could unravel.
A US official told Reuters: “They are reneging on what we agreed to in July.”
The official, who spoke on condition of anonymity, did not give details about which specific commitments Indonesia was now questioning.
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By GlobalDataIndonesia considers some of the latest US trade demands to be new, including provisions that would permit Washington to terminate the agreement if Jakarta enters into other agreements that the US believes could threaten its interests.
Indonesian Economic Minister Airlangga Hartarto and US Trade Representative Jamieson Greer are expected to hold a virtual meeting today to address these issues.
A central concern likely to be discussed would be the development of critical minerals, a sector the US has prioritised due to China’s influence over the supply chain, as well as investment in oil and gas.
The US has indicated that it wants any collaboration in these areas to exclude third parties, a condition that could affect Indonesia’s relationship with China as well as Russia.
In response to reports of US concerns, Indonesia said that discussions are ongoing and that it anticipates reaching an agreement “beneficial for both parties”, reported Bloomberg.
Under the July arrangement, Indonesia agreed to buy approximately $19bn (Rp316.85bn) of US goods, including 50 Boeing jets, and to remove tariffs on US imports.
The nation also agreed to drop certain requirements such as local-content rules that had previously complicated the sale of US products in Indonesia.
US President Donald Trump noted at that time that he had worked with Indonesian President Prabowo Subianto directly to finalise the agreement.
The matter of critical minerals is particularly significant for Indonesia, as it relies on China for investment, technology and processing capacity in its bauxite and nickel sectors.
Deputy Minister of Investment and Downstream Industry Todotua Pasaribu said in August that Chinese investment in Indonesia has increased by 31% in the past six years, as reported by Tempo. From 2020 to this year, Chinese investment exceeded $35bn (247.06bn yuan), with more than $15bn directed towards metal processing.
Meanwhile, during Indonesian President Prabowo Subianto’s visit to Moscow this week, Russian President Vladimir Putin said that Russia is ready to provide support to Jakarta in the nuclear energy field, reported Reuters.
In a televised discussion, Prabowo described the bilateral relationship as “excellent” and extended an invitation to Putin to visit Indonesia in 2026 or 2027.
Russia is currently involved in constructing nuclear power plants (NPPs) in various nations and has offered help to Indonesia.
Putin said to Prabowo: “If you consider it possible to engage our specialists, we are always at your disposal.”
Indonesia has announced plans to set up its inaugural NPP by 2032, targeting a capacity of 500MW.
