The near decade-long negotiations between the EU and Indonesia were hastened by the threat of US President Donald Trump’s aggressive tariff policy. The free trade deal will scrap most tariffs between the regions.The European Union (EU) and Indonesia on Tuesday reached an agreement on a free trade pact after more than nine years of negotiations. This process was expedited by US President Donald Trump’s sweeping tariff policy.
EU Trade Commissioner Maros Sefcovic and Indonesian Economic Affairs Minister Airlangga Hartarto signed the Comprehensive Economic Partnership Agreement (CEPA) and an Investment Protection Agreement in Bali.
The deal will scrap most tariffs on EU exports including car parts, agriculture and pharmaceuticals, while opening investment in sectors such as electric vehicles.
“I am convinced that today’s conclusion of negotiations is just the beginning of an exciting new chapter,” Sefcovic said.
Airlangga called the agreement “a milestone,” which would “mitigate risks from the impact of the global tariff war.”
European Commission President Ursula von der Leyen said the pact would boost jobs and growth while securing critical raw materials for Europe’s clean tech industries.
“Our deal with Indonesia creates new opportunities for businesses and farmers in a major and growing economy,” von der Leyen added.
How Trump’s tariffs hastened agreement
The talks, launched in 2016, had been stalled by issues over palm oil and deforestation rules. However, Trump’s aggressive tariff policy forced parties to expedite an agreement, Deni Friawan, a researcher at the Centre for Strategic and International Studies, told the AFP news agency.
Officials estimate that EU exporters will save about €600 million ($708 million) annually in duties.
About 80% of Indonesia’s exports to the EU, including palm oil, footwear, textiles and fisheries, will be tariff-free under the pact.
The EU is Indonesia’s fifth-largest trading partner, recorded $30.1 billion in bilateral trade last year and will gain wider access to the country’s 280 million consumers.
CEPA is the third trade deal for Brussels with Southeast Asian countries, after those with Singapore and Vietnam. It must now be ratified by EU member states, the European Parliament, and Indonesia before it comes into force, likely by 2027.
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