Indonesia and the European Union have reached a major free trade agreement after nine long years of talks. The deal was signed on September 23, 2025, in Nusa Dua on Bali island. Both sides hope it will help boost their economies and protect against new tariffs from US President Donald Trump. The agreement, called the Indonesia-European Union Comprehensive Economic Partnership Agreement or CEPA, aims to cut import duties on over 90 percent of goods. Most cuts will happen right away when the deal starts. Others, like Indonesia’s 50 percent tax on EU cars, will phase out over five years.
This news comes at a key time. Trump’s re-election in November 2024 has sparked fears of higher US tariffs on imports. Indonesia faces a broad 19 percent tariff on its goods to the US. The EU wants to build stronger ties with other countries to reduce its reliance on China for key resources. The deal could double trade between Indonesia and the EU. In 2024, goods trade was worth $30.1 billion. Indonesia expects that number to hit $60 billion in the first five years.
The signing happened during a joint announcement. Indonesia’s Minister of Economic Affairs stood with the EU Trade Commissioner. They shook hands in front of cameras, marking a win for both. This pact focuses on exports like textiles, clothing, and palm oil—a key ingredient in beauty products. For the EU, it means more sales of chemicals, machines, cars, and foods like milk powder and cheese. EU exporters could save €600 million, or about $707.4 million, in Indonesian duties each year.
Why Trump’s Tariffs Pushed This Deal Forward
President Trump’s return to the White House has changed global trade fast. Since November 2024, the EU has sped up talks with partners around the world. Deals with the South American group Mercosur, Mexico, and India are moving quicker. These alliances aim to shield Europe from US tariffs and cut dependence on China. China supplies many minerals needed for Europe’s green energy shift, like batteries and clean tech.
Indonesia, with its 284 million people, is a huge market. It’s a vast island nation in Southeast Asia, rich in resources. The trade deal helps both sides dodge US trade walls. Trump has said Indonesia’s goods will face 19 percent tariffs under a new US pact. But in return, Indonesia agreed to buy $15 billion in US energy, $4.5 billion in farm products, and 50 Boeing jets—many of them 777 models. He shared this on social media later.
For Indonesia, the EU deal opens doors to Europe. It expects big gains in palm oil, coffee, textiles, and clothing exports. Palm oil is huge—Indonesia is the world’s top producer. The EU buys a lot for food, cosmetics, and more. The Chairman of the Indonesian Palm Oil Association, Eddy Martono, welcomed the tariff cuts. But he warned about other issues. Non-tariff barriers, like the EU Deforestation Regulation or EUDR, still hurt. This rule asks growers to prove their palm oil didn’t come from forests cut after 2020. The EU might delay it by a year, but Martono says it needs fixing soon. “There is still homework to be done,” he told reporters via text. Without changes, it could weaken the trade deal’s power.
Boosting Investment and Key Resources
The agreement goes beyond just trade. It promises closer supply chains for critical minerals, renewable energy, innovation, and investment. Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, is excited. He told reporters about talks with EU car makers for battery and electric vehicle plants in Indonesia. This could create jobs and tech sharing.
EU Trade Commissioner Maros Sefcovic spoke in Bali about the wins. He said the deal will draw more European money into Indonesia. It also improves EU access to vital minerals like nickel, copper, bauxite, and tin. These are key for Europe’s clean tech, steel, and electric cars. Indonesia has tons of these resources, making it a top partner.
The EU sees this as a smart move for its green goals. Reducing China ties means safer supply chains. For Indonesia, it means growth as it nears upper-middle-income status by 2027. At that point, it loses special low duties from the EU for developing nations. So, locking in this deal now is crucial.
Next Steps and Challenges Ahead
The pact isn’t final yet. In the coming months, it faces legal reviews and translations into the EU’s 24 official languages. Then, EU governments and the European Parliament must approve it. Indonesia hopes it starts on January 1, 2027—just in time to keep benefits.
Hartarto stressed the big picture. “We look forward to closer supply chains,” he said. This includes everything from minerals to green energy. For fashion and beauty fans, the deal means cheaper imports. Textiles and clothing from Indonesia could cost less in Europe. Palm oil, used in shampoos and creams, might see steady prices too.
But hurdles remain. The EUDR is a big one for palm oil farmers. It aims to stop deforestation but adds paperwork. Growers say it could slow exports even with zero tariffs. The EU delay helps, but talks continue.
How This Changes Global Trade
This deal shows how Trump’s tariffs are reshaping the world. Countries team up to stay strong. For Indonesia, it’s a step to more wealth and jobs. Factories for EVs and batteries could employ thousands. For the EU, it’s secure minerals for net-zero goals.
In fashion, expect more Indonesian fabrics and clothes in European stores. Brands like Zara or H&M might source cheaper. Beauty firms using palm oil could pass on savings.
Experts say this is just the start. More pacts could follow. Trump’s “America First” pushes others to “Europe Together” or “Asia United.”
As the world watches, this Bali handshake could spark a trade boom. It offsets tariffs and builds bridges. In a tense global market, that’s a breath of fresh air.
