US, Indonesia sign framework deal to boost agricultural products, biofuels trade

The US and Indonesia announced on July 22 a reciprocal trade framework agreement that promises to slash tariffs and remove regulatory barriers, unlocking billions of dollars in US exports of agricultural commodities, biofuels, animal proteins, refined products and aircraft.

The joint statement, released by the White House, outlines sweeping market access commitments, tariff cuts and billions of dollars in planned commercial deals, but leaving final details to be negotiated in the coming weeks.

The framework follows US President Donald Trump's July 15 remarks claiming Jakarta had pledged $4.5 billion in US food and agricultural imports, $15 billion in energy purchases, and 50 Boeing jets, in exchange for a cut in US tariffs on Indonesian goods to 19% from 32%.

Under the framework agreement, Indonesia committed to eliminate nearly all tariff barriers on US grains, soybeans, wheat, cotton, beef, pork and dairy, as well as ethanol feedstocks and industrial goods, while the US will cut its reciprocal tariff rate on Indonesian-origin goods to 19% from 32%, with further reductions possible.

For US exporters of soybeans, wheat, ethanol and meat facing rising competition from Brazil and Australia, the deal is expected to cement Indonesia's position as a critical growth market for agriculture and biofuel feedstocks.

Key provisions

According to the July 22 joint statement, Indonesia agreed to eliminate around 99% of tariff barriers on US food, agriculture, and industrial goods.

In return, the US will lower the tariff on Indonesian-origin goods to 19%, with the possibility of further reductions for commodities "not naturally available or produced" domestically.

Indonesia also committed to

• Exempt US food and agricultural goods from import licensing regimes and commodity balance requirements.
• Permanently grant Fresh Food of Plant Origin designation to US products and recognize US food safety certifications.
• Remove local content, labeling, and other non-tariff barriers on US goods ranging from cosmetics to medical devices.
• Accept US meat, poultry and dairy certifications and facilities listings.
• Resolve long-standing intellectual property, digital trade, and forced labor concerns.

The US and Indonesia also pledged to collaborate on environmental protections, combatting illegal timber and fisheries, protecting labor rights, and enhancing supply chain resilience. Indonesia agreed to join the Global Forum on Steel Excess Capacity.

Big ticket purchases

Both governments noted that alongside the framework, US and Indonesian companies are preparing commercial deals worth over $23 billion, including:

• $4.5 billion in US food and agriculture, including soybeans, wheat, cotton and soybean meal.
• $15 billion in US energy -- LPG, crude oil and gasoline.
• $3.2 billion for aircraft procurement.

These purchases, if finalized, would represent a significant expansion of the $3.3 billion in US agricultural exports to Indonesia in 2024, which were led by soybeans, dairy, distillers' grains, cotton, wheat, and beef.

Indonesia is already the second-largest global wheat importer and the largest buyer of US soybeans in Southeast Asia. The Indonesian Flour Producers Association earlier this month signed a memorandum of understanding to purchase 1 million mt/year of US wheat from 2026 to 2030.

Palm oil and beyond

For Indonesia, whose main agricultural export to the US is palm oil -- accounting for 85% of US palm oil imports -- the framework offers a competitive edge over Malaysia, which faces a 25% US tariff under current rules.

Vegetable oil traders said the lower 19% tariff could support Indonesian palm oil flows, though the advantage was described as "modest" given global price and demand dynamics.

The July 22 statement clarifies that the commitments remain subject to negotiation and domestic formalities before the agreement enters into force. Analysts urged caution on the timeline.

"Prima facie, this deal is not beneficial for Indonesia -- the headline tariffs and purchases favor the US, particularly for soybeans and wheat," an oilseeds broker said. "But politically, it may buy Indonesia relief from Trump's earlier 32% tariff threat."

In the coming weeks, the US and Indonesia are expected to finalize text, prepare the agreement for signature, and complete domestic approval processes.

Platts, part of S&P Global Commodity Insights, assessed crude palm oil CFR West Coast India for August shipment at $1,114/mt on July 22, up $11.50/mt from July 21, above a bid and tracking higher future prices.

The Bursa Malaysia Derivatives palm oil futures October contract rose by MR38/mt, or $8.98/mt, during the day.