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A trade deal between Indonesia and the United States is at risk of collapsing as Washington officials believe Jakarta will withdraw from the terms of the deal, according to the Financial Times.
The report cited people familiar with the matter as saying on Tuesday that U.S. Trade Representative Jamison Greer believes Indonesia is “backtracking” on some of the commitments it has made.
Indonesian officials are reportedly reluctant to agree to the binding commitments made in the agreement and have informed the USTR of their reluctance.
The US government believes Indonesia is “backtracking” on its commitments to eliminate non-tariff barriers to US industrial and agricultural exports and address digital trade issues.
Reuters reported on Wednesday that Indonesian officials told the agency that tariff negotiations were ongoing and that no particular problems had arisen during the negotiations.
US President Donald Trump announced a deal with Indonesia in mid-July, lowering so-called “reciprocal” tariffs on the Southeast Asian nation to 19% from the 32% he had threatened in a “tariff letter” to Indonesia earlier that month.
President Trump said Indonesia was “committed” to buy $15 billion in U.S. energy, $4.5 billion in U.S. agricultural products and 50 Boeing jets as part of the deal.
The US President also stated at the time that “US exports to Indonesia are not subject to tariff or non-tariff barriers.”
USTR and Indonesia’s Ministry of Trade did not immediately respond to CNBC’s requests for comment.
trading friction
A person familiar with the matter told the FT that Indonesia “has been upfront about not being able to live up to the terms of the deal and that the initial non-binding commitments need to be renegotiated,” adding that this stance is “highly problematic and unpopular with the US. Indonesia may be at risk of losing the deal.”
This is not the first time that the US government and Jakarta have been at odds over a trade deal. The FT reported in November that Indonesia rejected a “poison pill” clause in the deal agreed to by other Southeast Asian countries, including Malaysia.
“Poison pill” clauses threaten to cancel trade agreements if the United States signs a competing agreement that it deems to harm its vital interests.
President Trump’s trade deals with Asian countries have also been pushed back by other countries in the region after these initial agreements were announced.
For example, President Trump said South Korea would invest $350 billion in the country, but said the South Korean government could not simply hand over that amount in cash. South Korea ultimately committed to investing $200 billion in cash and spending $150 billion of the fund on shipbuilding investments over 10 years.
President Trump also announced that Japan would invest $550 billion in the country and that the United States would receive 90% of the profits from these investments. However, the Japanese government later announced that the profits would be split 50-50 based on the contribution of both Japan and the United States.
