Indonesia's president said his US counterpart, Donald Trump, is a "tough negotiator" after the two countries reached a trade deal that resulted in a reduction in proposed tariffs to 19% from 32%.

The deal is one of a handful reached so far by the Trump administration ahead of the August 1 negotiation deadline, but Indonesia, Southeast Asia's largest economy and a member of the G20, has not provided further details.

Trump said Indonesia has committed to buying 50 Boeing (BA.N) aircraft, opening up new jets, $15 billion worth of U.S. energy supplies, and $4.5 billion worth of U.S. agricultural products. "We've agreed to go from 32%, if I'm not mistaken, down to 19%... I'm still negotiating, but I have to admit, he's quite a tough negotiator," Indonesian President Prabowo Subianto told reporters on Wednesday after a phone call with Trump.

Prabowo, returning from an overseas trip, including Brazil for the BRICS conference, said he had spoken with Trump. He added that while he understood the United States' perspective on the negotiations: "We have made our offer, we cannot give more."

Trump's comments outlined an Indonesian agreement similar to a recent initial pact with Vietnam, with no levies on US exports to Indonesia. The agreement also includes penalty tariffs for so-called transshipment of goods from China through Indonesia.

Indonesia, the world's fourth-most populous country, recorded a $17.9 billion goods trade surplus with the United States in 2024, according to the US Trade Representative.

"This is an extraordinary effort by our negotiating team led by the Coordinating Minister for Economic Affairs," Hasan Nasbi, the Indonesian president's spokesman, told reporters earlier. Nasbi said Indonesia's tariffs are much lower than those of other countries in Southeast Asia.

The Jakarta Stock Exchange (.JKSE) opened up 0.8% on Wednesday following the agreement, which Indonesia's central bank said would provide a positive catalyst for economic activity. The Jakarta Stock Exchange (JKSE) has risen 10% since early April.

Indonesia's central bank cut interest rates on Wednesday, saying the deal would have a positive impact on Indonesia's exports and economic growth, as well as providing certainty to financial markets.

A report by Capital Economics stated that the rate cut is likely to remain in place, but the trade deal helps remove a major source of uncertainty.

"While details are still scarce, it appears this deal is similar to the one reached with Vietnam, with restrictions on rerouting from China, once again, the primary target," the report said. Natixis warned that the Indonesian economy would still be affected by Trump's tariffs on China, Indonesia's largest trading partner. "Well, 19% is better than 32%," said Matt Simpson, senior market analyst at City Index in Brisbane. "Indonesia's non-oil and gas exports, such as footwear and textiles, will be hit, but energy and agriculture will strengthen. Officials are certainly happy that they have Trump's support," he added.

Myrdal Gunarto, an economist at Maybank Indonesia, described the deal as relatively good, as Jakarta is getting lower tariffs than those imposed on other Southeast Asian neighbors. "(This) opens up more room for lower domestic monetary policy rates," he said, predicting it would also trigger capital inflows. (alg)

Source: Reuters