EU secures access to one of the world's largest raw material deposits with Indonesia trade deal

The EU is protecting itself against global trade uncertainties in the potential period of Donald Trump's second US presidency by signing multiple trade agreements worldwide - including with Mercosur countries, Japan and India - to secure new markets.

The new free trade agreement with Indonesia, reached after nine years of negotiations, fits into this strategy.

The agreement will be signed by Brussels and Jakarta leaders on 23 September, after new US tariff measures prompted urgent action from both sides. The Trump administration imposed a 19% uniform tariff on Indonesian products, while most EU products faced a 15% tariff ceiling, which accelerated the conclusion of negotiations.

Indonesia, Southeast Asia's largest economy and the world's most populous Muslim country with nearly 300 million inhabitants, is a strategically important partner for the EU both economically and in terms of raw material supply.

Bilateral trade was worth approximately USD 30 billion last year, and

Jakarta promises to introduce zero-percent tariffs on 80% of Indonesian export products within one to two years after the agreement takes effect.

The country is particularly rich in raw materials such as palm oil and nickel, the latter being crucial for electric vehicle battery production. The EU can expect Indonesian tariff reductions on industrial and agricultural exports, including cars and machinery.

European Commission President Ursula von der Leyen urged for a swift agreement following her July meeting with the Indonesian president.

She believes the deal will open new markets, strengthen supply chains, and help secure stable access to raw materials necessary for green transition, including materials essential for clean technologies and the steel industry.

The agreement could encourage European investments in Indonesia, where Chinese companies currently dominate, especially in steel and mining sectors. The deal includes commitment to the 2015 Paris Climate Agreement and incorporation of environmental and labour rights provisions.

However, negotiations were accompanied by tensions, mainly due to EU's unilateral green regulations. Indonesia seeks exemption from the end-of-year deforestation rule for palm oil, which requires producers to prove their plantations are not on newly deforested land. The Jakarta government argues smaller farmers will struggle to meet the necessary administrative requirements.

The two parties also have several disputes at the World Trade Organization:

the EU objects to Indonesia's nickel export restrictions, while Indonesia recently won a case regarding EU biodiesel countermeasures.

The agreement must be approved by both a qualified majority of EU member states and the European Parliament. While green organisations and farming interest groups are expected to lobby against it, Indonesia does not export the most sensitive EU agricultural products such as beef, sugar, and dairy products. The ratification process is expected to take at least a year, while the new investor dispute settlement system will only take effect when all 27 member states' parliaments ratify the agreement. On Indonesia's side, approval could be faster: the trade ministry estimates ratification will take one to two months.

Cover photo (for illustration purposes only): EU