In a major shift in U.S. trade policy, President Donald Trump on Tuesday announced a new agreement with Indonesia that will impose a 19% tariff on Indonesian goods, while exempting U.S. exports from any reciprocal duties. The deal forms part of Trump’s broader strategy to renegotiate trade deals in America’s favor and reduce the national trade deficit.
Tariffs Target Palm Oil, Footwear, Electronics
Indonesia, though a relatively minor trading partner with just under $40 billion in annual trade with the U.S., exports key goods such as palm oil, electronics, footwear, car tires, natural rubber, and frozen shrimp. These products will now face a flat 19% import duty, nearly double the existing baseline 10%. Trump also revealed that more deals with other countries are in progress ahead of the August 1 deadline, when tariffs on most U.S. imports are expected to increase.
Trump Announces Major Purchase Commitments
The agreement includes provisions to curb Chinese transshipments via Indonesia and a commitment by Indonesia to purchase U.S. goods. Trump claimed Indonesia has agreed to buy $15 billion in U.S. energy products, $4.5 billion in agricultural goods, and 50 Boeing aircraft, though no delivery timeline was disclosed. A similar deal with Vietnam is reportedly near completion.
Effective Tariffs at Highest Since 1933
The Yale Budget Lab estimates that the average U.S. tariff rate will rise to 20.6%, the highest since the Great Depression. Consumption adjustments may slightly reduce this to 19.7%, still drastically above the pre-2024 rate of 2%-3%. Trump’s aggressive trade moves have shaken global markets and raised concerns about inflation and trade instability.
EU Readies Tariff Strike on $84 Billion U.S. Goods
As the U.S. escalates its trade actions, the European Union is preparing countermeasures. The European Commission has outlined potential tariffs on $84.1 billion worth of U.S. goods, including Boeing aircraft, whiskey, cars, medical devices, and food products. These actions are in response to Trump’s planned 30% tariff on EU imports starting August 1 — a move the EU says could destroy normal trade ties between two of the world’s largest economies.
Trade Talks with India Also Progressing
Trump also hinted that India could be next, with trade discussions progressing along similar lines. As the U.S. tightens its global trade posture, the ripple effects are expected to impact global supply chains, consumer prices, and diplomatic ties.
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