The United States has agreed in principle to exempt Indonesia’s exports of palm oil, cocoa, and rubber from the 19% import tariff imposed by former President Donald Trump, effective August 7, according to Airlangga Hartarto, Indonesia’s Coordinating Minister for Economic Affairs and chief trade negotiator with the U.S.
Tariff Exemption Agreement and Negotiation Progress
Minister Airlangga Hartarto told Reuters that the exemption would take effect once both sides finalize the agreement, though no specific timeline has been set, as the U.S. is still engaged in trade negotiations with other countries.
He added that the U.S. and Indonesia are also in talks regarding U.S. investments in fuel storage facilities through partnerships between Indonesia’s sovereign wealth fund Danantara and the state-owned energy company Pertamina.
“We are waiting for their response, but during the meeting, both sides agreed in principle that products not produced in the U.S.—such as palm oil, cocoa, and rubber—will be subject to a 0% or near-zero tariff,” Airlangga said.
The U.S. Embassy in Jakarta did not immediately respond to requests for comment.
Economic and Trade Implications
Indonesia is the world’s largest exporter of palm oil and a major global supplier of natural rubber.
Although Indonesia was among the first countries to reach a trade understanding with the Trump administration in July, it still faced similar tariff levels to other exporters like Thailand and Malaysia, slightly lower than Vietnam’s 20% rate.
During the negotiations, Indonesia proposed investing billions of dollars in the U.S., along with purchasing crude oil, LNG, aircraft, and agricultural products from American suppliers. In return, Jakarta also pledged to eliminate import duties on most U.S. goods entering Indonesia.
Minister Airlangga noted that tariff certainty from the U.S. and the recent progress in Indonesia–EU free trade talkscould boost Indonesia’s economic growth, helping the government achieve its 5.4% growth target in 2026, up from an estimated 5% in 2025.
“This development brings optimism from global markets, as most investors seek certainty — and Indonesia stands out as one of the few nations providing such stability,” he said.
Investment and Industrial Policy Outlook
Airlangga emphasized that Jakarta aims to attract more foreign investors to develop domestic industrial capacity, particularly in processing key commodities—replicating the success achieved through Chinese investment in nickel projects.
He added that the government also plans to expand investment in silica sand processing, targeting the production of solar panels and semiconductor wafers, key sectors for Indonesia’s future industrialization and green transition.