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World

EU-Indonesia Trade Deal: How Brussels is Countering US Tariffs and Expanding in Southeast Asia

EU and Indonesia nearing a free trade deal. EU seeks access to a market of 280 million, eyes diversification.

byAndres Castro

September 23, 2025, 9:11 AM

Executive Summary

The European Union and Indonesia are nearing the conclusion of a bilateral free trade agreement, with EU Trade Commissioner Maroš Šefčovič in Jakarta to finalize negotiations.

The proposed agreement would provide the EU access to a new market of approximately 280 million people, building on 27.3 billion EUR in bilateral trade in 2024, making Indonesia the EU’s fifth-biggest ASEAN trading partner.

This strategic move allows the EU to diversify its trade partnerships and strengthen its economic presence in Southeast Asia, partly in response to tariffs imposed by the United States on EU imports.

The Story So Far

The European Union is actively seeking to diversify its trade partnerships and expand access to new markets, a strategic shift largely driven by the United States’ imposition of tariffs on EU imports, which has made trade with its traditional partner less favorable. This push has made securing a free trade agreement with Indonesia, a country with a market of 280 million people and a significant trading partner within ASEAN, a high priority for the bloc.

Why This Matters

The nearing EU-Indonesia free trade agreement represents a strategic move for the European Union to diversify its global trade partnerships, particularly in response to ongoing tariffs imposed by the United States, and to solidify its economic presence in the rapidly growing Southeast Asian market with access to 280 million consumers.

Who Thinks What?

The European Union views the potential trade agreement with Indonesia as a strategic imperative to diversify its trade partnerships, gain access to a new market of 280 million people, and strengthen its economic presence in Southeast Asia, especially given ongoing trade challenges with the United States.

Indonesian President Prabowo Subianto has reached a “political agreement” with the European Commission President and expressed confidence in concluding the deal, signaling Indonesia’s willingness to finalize the bilateral free trade agreement.

The European Union and Indonesia are nearing the conclusion of a bilateral free trade agreement, with EU Trade Commissioner Maroš Šefčovič arriving in Jakarta on September 22 to finalize negotiations. This push follows a “political agreement” reached last July between Indonesian President Prabowo Subianto and European Commission President Ursula von der Leyen, who expressed confidence in concluding the deal by September of this year.

Negotiations Intensify

The intention to finalize political negotiations for an EU-Indonesia trade agreement was confirmed by European Commission (EC) deputy chief spokesperson Olof Gill. Commissioner Šefčovič’s visit underscores the bloc’s commitment to securing the deal.

Economic Significance

The proposed agreement would grant the EU access to a new market of approximately 280 million people. Bilateral trade between the EU and Indonesia reached 27.3 billion EUR (32.1 billion USD) in 2024, with EU exports valued at 9.7 billion EUR and imports at 17.5 billion EUR.

Indonesia was the EU’s fifth-biggest trading partner within ASEAN in 2024, highlighting its strategic importance for the bloc in the region.

Strategic Imperative for the EU

Increasing trade access to new markets has become a top priority for the EU. This strategic shift is largely influenced by the decision of the United States, a historic trade partner, to impose tariffs on EU imports.

Under a trade agreement reached last July between the EC and the US administration, 15% tariffs now apply to most EU goods. Furthermore, 50% tariffs continue to be levied on imports of EU steel and aluminum.

Outlook

The potential trade deal with Indonesia represents a strategic move for the EU to diversify its trade partnerships and strengthen its economic presence in Southeast Asia, while also navigating ongoing trade challenges with traditional allies.