Stalled commitments and political hesitation now put a key bilateral trade agreement at serious risk.
Tensions are rising between Washington and Jakarta as a once-promising trade agreement now edges toward collapse. What began as a breakthrough framework in July has turned into a dispute marked by stalled commitments, political hesitation, and growing frustration inside the White House.
A Deal at Risk
Washington officials believe Indonesia is backtracking on its July commitments, prompting warnings that the entire agreement may fall apart. US trade representative Jamieson Greer expressed concern that Jakarta is refusing binding commitments it previously accepted, according to people familiar with the talks.
Concerns Over Non-Tariff Barriers
A major sticking point involves Indonesia’s reluctance to eliminate non-tariff barriers on American industrial and agricultural exports. US negotiators also expected stronger commitments on digital trade issues. The perceived reversal has fueled frustration in Washington, where the administration sees Indonesia’s current stance as a significant setback.
Internal Politics in Jakarta
Sources believe President Prabowo Subianto and Coordinating Minister for Economic Affairs Airlangga Hartarto initially supported the deal before involving other senior officials. Political considerations now appear to be slowing progress, with Washington convinced that Prabowo could enforce the agreement but is choosing not to act.
Indonesian officials dispute this interpretation. Economic affairs ministry spokesperson Haryo Limanseto said negotiations remain normal and ongoing, emphasizing the goal of securing a mutually beneficial outcome.
Pressure From Washington
Greer is expected to speak directly with Airlangga this week to resolve outstanding issues. The July framework emerged after the US warned more than 20 trading partners of potential tariffs if they did not reach agreements by August 1. Indonesia was initially threatened with a 32 percent tariff before negotiations lowered it to 19 percent.
Under the July terms, Indonesia agreed to remove most tariffs on US goods and commit to major American purchases, including aircraft, liquefied natural gas, and soybeans. Jakarta also agreed to dismantle strict local-content requirements that US companies said hindered investment.
Domestic Pushback and Business Concerns
Some Indonesian business groups resist removing local-content rules, arguing that doing so could weaken domestic industry. Apple faced similar hurdles last year when Indonesia banned the iPhone 16 for failing to meet a 40 percent local-content threshold, lifting the ban only after the company agreed to invest in local component production.
Geopolitical Complications
The US seeks to include protective clauses in regional trade agreements that allow Washington to cancel deals if partners sign competing pacts considered harmful to US strategic interests. Malaysia and Cambodia have accepted these terms, but Indonesia has shown hesitance, citing concerns about economic sovereignty.
A brief Reuters report echoed the Financial Times’ findings, noting that Jakarta informed Greer it could not agree to certain binding commitments, adding further uncertainty to the negotiations.
The dispute carries significant implications for Southeast Asia, where Indonesia plays a central role in balancing relations between major powers. For both Indonesians and Singaporeans, a failed agreement could reshape regional trade flows, investment sentiment, and geopolitical alignment at a time when economic cooperation is increasingly tied to strategic influence. The coming weeks will determine whether the world’s fourth-most-populous nation and its largest economy can prevent a promising deal from unraveling.
Sources: FT (2025) , Channel News Asia (2025)
Keywords: US Indonesia Trade Deal, Jamieson Greer, Jakarta Commitments, Non Tariff Barriers, Digital Trade, Prabowo Subianto
