Indonesia and the EU Sign a Near-Zero Tariff Agreement

2025-11-07

On September 23, 2025, Indonesia and the European Union officially signed the Indonesia-European Union Comprehensive Economic Partnership Agreement (IEU-CEPA) in Bali. This trade agreement, which has gone through nine years of negotiations and 19 rounds of talks, has finally been concluded, marking the establishment of a new trade cooperation framework between the world’s third-largest economy and the largest economy in ASEAN. The core content of the agreement is to eliminate tariffs on more than 98% of tariff lines and 99% of total import value, realizing “near-zero tariff” trade for most commodities.

According to the arrangement of the agreement, 90.4% of Indonesia’s exports to the EU will enjoy zero tariff treatment immediately after the agreement takes effect, and tariffs on the remaining products will be reduced year by year. On the EU side, tariffs on automobiles will be reduced from 50% to zero within 5 years, and tariffs on machinery and home appliances will be gradually reduced to zero from 30%, which will significantly reduce the cost for Indonesian consumers to purchase European-made products. The breakthrough progress of this agreement is largely driven by the external catalyst of the U.S. tariff policy on China. Currently, the EU is facing a 15% “reciprocal tariff” and a 50% tariff on steel and aluminum from the United States, while Indonesia is under 19% U.S. tariff pressure. The common external pressure has prompted both parties to make compromises on previously deadlocked issues.

For Indonesia, this agreement can be regarded as a milestone in its foreign trade history. Official estimates show that in the early stage of the agreement’s entry into force, Indonesia’s exports to the EU will increase by 60%, and the bilateral trade volume is expected to double in the next 5 years, directly driving an increase of

2.8 bi ll i o ninna t i o na l in co m e . I n d o n es i a^{'} s t r a d i t i o na l a d v an t a g eo u s p ro d u c t ss u c ha s p a l m o i l, co ff ee, an d t e x t i l es w i ll b e n e f i t s i g ni f i c an tl y . A m o n g t h e m, p a l m o i l, a co n t ro v ers ia lp ro d u c t, ha srece i v e d “ s p ec ia lt re a t m e n t “ f ro m t h e E U, o p e nin g a g ree n c hann e l f or t h e E U ma r k e t . E x p or t so f hi g h - t ec h p ro d u c t ss u c ha ss ma r tp h o n es w i ll a l so u s h er inn e w o pp or t u ni t i es, h e lp in g I n d o n es iaim p ro v e i t s p os i t i o nin t h e g l o ba l v a l u ec hain . T h e bi l a t er a lt r a d e v o l u m e b e tw ee n I n d o n es iaan d t h e E U w a s

30.1 billion in 2024, and it is expected to achieve leapfrog growth after the full implementation of the agreement.

Through this agreement, the EU has achieved dual strategic goals. On the one hand, it ensures the security of the supply chain of key raw materials. Indonesia ranks first in the world in terms of nickel ore reserves and output and is a core raw material supplier for Europe’s digital and green transformation. The agreement allows nickel deep-processing products to enter the EU duty-free and establishes a joint technology fund to balance the interests of both parties. On the other hand, the EU has deepened its strategic presence in the Asia-Pacific region through this agreement. Indonesia has become the third Southeast Asian country to sign a comprehensive free trade agreement with the EU after Singapore and Vietnam, reflecting the EU’s strategic determination to deepen its presence in the Southeast Asian market and hedge against geopolitical risks.

Indonesia and the EU Sign a Near-Zero Tariff Agreement

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