The US agrees to exempt Indonesia from tariffs on palm oil and coffee

The US and Indonesia have reached a tariff agreement, under which Washington will exempt Indonesian palm oil, tea, and coffee from tariffs, paving the way for a trade deal to be signed at the end of January 2026.

Indonesia and the United States have reached a consensus on all key issues in a tariff agreement, paving the way for the signing of the agreement between Indonesian President Prabowo Subianto and US President Donald Trump, expected by the end of January 2026.

Speaking from Washington on the evening of December 22nd, following a meeting with US Trade Representative Jamieson Greer, Indonesian Coordinating Minister for Economic Affairs Airlangga Hartarto stated that the US is seeking access to Indonesia's key minerals and has agreed to exempt tariffs on several of the country's major exports, including palm oil, tea, and coffee. Indonesia is currently the world's largest exporter of palm oil and one of the leading global suppliers of Robusta coffee.

Bilateral talks were at one point on the verge of collapse earlier this month, after the US accused Indonesia of failing to fully implement previous commitments. However, Jakarta insisted the differences only concerned "standardizing the language" in the text and did not disrupt the negotiation process.

Mr. Airlangga stated that recent rounds of negotiations have been positive and all key issues have been resolved, with the goal of ensuring balanced market access for US goods in Indonesia and for Indonesian goods in the US market.

Currently, both sides are arranging a high-level meeting between President Prabowo and President Trump at the end of January 2026, where the trade agreement could be formally signed. Minister Airlangga emphasized that this agreement does not restrict Indonesia's right to sign trade agreements with other countries, and is both commercial and strategic in nature, bringing balanced economic benefits to both sides. According to a subsequent statement from Minister Airlangga's office, the agreement is also expected to include cooperation in the areas of digital trade, technology, and national security, although details have not yet been released.

Previously, the US had imposed a 19% tariff on Indonesian goods under a preliminary agreement reached last July, down from the 32% that President Trump had threatened to impose in April, in exchange for Indonesia's commitment to remove tariff and non-tariff barriers to US goods, as well as increase purchases of US goods to narrow the trade deficit.

Mr. Airlangga asserted that there was no risk of the US reinstating the 32% tariff even if the signing ceremony were delayed, as all terms in the draft agreement had been agreed upon by both sides. According to Indonesian figures, bilateral trade reached $36.2 billion in the first 10 months of this year, with Indonesia having a trade surplus of $14.9 billion. The US is currently Indonesia's second-largest export market.

Source: VTV