CEPA: EU and Indonesia accelerate negotiations for an agreement by the end of September 2025
On July 13, a « political agreement » between the European Union and Indonesia was announced with a view to removing trade barriers between the Twenty-Seventh and the first South-East Asian economy.
As the US President continues his tariff war, Brussels is stepping up its efforts to build relationships with new partners around the world. On Sunday 13 July, European Commission President Ursula von der Leyen and Indonesian President Prabowo Subianto endorsed a political agreement to finalize the Comprehensive Economic Partnership Agreement by September 2025. This free trade agreement aims to remove trade barriers between the EU and the first South-East Asian economy, while strengthening critical raw material supply chains, which are essential for European clean technologies.
CEPA should stimulate trade, support Indonesia's sustainable industrialization and provide new opportunities for European companies. The agreement also represents a shared commitment to building an economic partnership based on openness, resilience and cooperation. The EU is Indonesia's fifth largest trading partner, with trade of $30.1 billion in 2024. Both sides are also committed to strengthening the partnership between ASEAN (Association of Southeast Asian Nations) and the EU.
While Sunday's announcement marks a decisive milestone in Euro-Indonesian relations, Brussels and Jakarta have been in talks since 2016 to reach an agreement. The discussions were relaunched in 2023 (cf. EU/Indonesia: towards a trade pact in 2023?). However, a number of sensitive issues remained to be resolved, such as differences in biofuels or EU plans to ban imports responsible for deforestation from EU territory, which could affect certain Indonesian products such as palm oil, rubber or wood. Since then, the implementation of this legislation has been postponed to the end of 2025.
Indonesia remains one of the few countries with which the United States has already signed an agreement under the so-called reciprocal tariffs, after the United Kingdom and Vietnam. On Wednesday, 16 July, President Donald Trump announced that he had concluded an agreement allowing American products to enter the Indonesian market without customs duties, while Indonesian products would be charged an additional 19 per cent customs duty upon entry into the United States, instead of the 32 per cent originally planned.