Indonesia Gets Trump's Tariff Deal. What About Everyone Else?

Indonesian President Prabowo Subianto was all smiles in Washington Thursday, having just inked a deal that exempts his country's palm oil, coffee, and cocoa from US tariffs. Meanwhile, trade officials from dozens of other nations were likely reaching for their phones, wondering when their turn might come.

The Indonesia-US agreement offers a revealing glimpse into how Trump's tariff strategy actually works: it's not about blanket protectionism, but strategic deal-making that rewards those willing to play ball.

The Art of the Exemption

Under the new agreement, Indonesian goods face a 19% base tariff rate—but the devil's in the details. The exempted commodities happen to be Indonesia's biggest export earners, while 99% of American exports to Indonesia get preferential treatment.

It's a win-win that masks a deeper reality: tariffs have become Trump's preferred negotiating tool, not just a revenue generator. Indonesia's $28 billion annual trade with the US suddenly becomes a template for how other countries might secure their own deals.

For Indonesia, the timing couldn't be better. Palm oil prices have been volatile, and securing tariff-free access to the world's largest consumer market provides crucial stability for an industry that employs millions of Indonesian workers.

The Waiting Room Gets Crowded

But Indonesia's success raises uncomfortable questions for other trading partners. If a 19% rate is considered reasonable for Southeast Asia's largest economy, what might smaller nations face?

The European Union, still smarting from previous trade wars, finds itself in an awkward position. Unlike Indonesia's clear-cut commodity exports, European goods—from German cars to French wine—compete directly with American products. That makes exemptions politically harder to justify.

South Korea faces a particularly complex challenge. Its $131 billion trade relationship with the US spans everything from semiconductors to steel—sectors Trump has historically targeted. Unlike Indonesia's palm oil, Korean exports often compete head-to-head with American manufacturers.

Even traditional allies aren't guaranteed favorable treatment. Canada and Mexico, despite USMCA protections, have already faced steel and aluminum tariffs in Trump's first term. The message is clear: proximity doesn't guarantee preferential treatment.

The New Tariff Calculus

What made Indonesia's deal work? Three factors stand out.

First, complementarity matters. Indonesian palm oil doesn't threaten American farmers—it fills a gap in US supply chains. Countries exporting goods that compete directly with American products face a much tougher negotiation.

Second, geopolitical value counts. Indonesia's strategic position in the South China Sea and its role in US-China competition gave Prabowo extra leverage. Countries offering less strategic value may find themselves with fewer bargaining chips.

Third, timing is everything. Indonesia moved fast, securing a deal while Trump's team was still setting precedents. Latecomers may face higher baseline rates as the administration's position hardens.

Beyond the Headlines

The Indonesia deal reveals how Trump's trade policy creates new forms of economic diplomacy. Instead of multilateral frameworks like the WTO, we're seeing bilateral negotiations where each country must prove its individual worth to the US market.

This approach has winners and losers. Resource-rich nations with non-competing exports may find opportunities. Manufacturing economies that compete with American industry face steeper challenges.

For American consumers, the picture is mixed. Exempting Indonesian palm oil keeps food costs stable, but the 19% rate on other goods will likely translate to higher prices on everything from textiles to electronics.

American businesses operating in Indonesia benefit from the 99% exemption rate, potentially giving them advantages over competitors from non-deal countries. But supply chain complexity means many US companies still face higher costs on Indonesian components.