My Say: Why Indonesia’s deal with Trump raises alarm bells

WHEN countries throw caution to the wind in this current round of “Liberation Day” tariff wars, desperately pursuing what they imagine as immediate wins or geopolitical strides, they run the risk of destroying the very foundations of their trade regimes.

Hard-won and time-honoured tenets in trade relations enshrined in the World Trade Organization (WTO) are reduced to ashes, leaving them — developing economies — stuck in a dead end with no wiggle room to manoeuvre. When that happens, echoes of ABBA’s haunting refrain “the winner takes it all” come to mind, bringing no relief to those at the losing end.

This seems to be the conclusion drawn about the fate of Indonesia with US President Donald Trump’s recent victory chant of having secured a “landmark” trade deal with Southeast Asia’s largest economy and the world’s most populous Muslim-majority democracy.

For the US, it certainly looks like the mother lode of deals, as it gives the US unprecedented access to a market of 282 million people, the titan of Asean member states as far as population size goes.

Yet, it doesn’t take much to see that behind the fanfare, the so-called breakthrough looks more like unmitigated capitulation, signalling the emergence of the geopolitics of unconditional surrender, not seen since the days of gunboat diplomacy which reigned supreme during the age of imperialism.

True, there is no display of menacing naval forces, unlike those days when the mere flexing of military muscle would be good enough to do the trick. Today, economic coercion by the strong and the powerful suffices for the gunboat metaphor to place the weaker economies under duress.

In this case, the much-touted “deal” is clearly a lopsided arrangement tilted heavily in favour of Trump’s America that will see Indonesia dismantling all tariffs and non-tariff barriers on US goods. In return, the US will impose a 19% tariff on Indonesian exports. This gives new meaning to the expression “turning the other cheek” — not because this arrangement marks a dramatic departure from conventional trade norms, but because it showcases the mother of all trade inequities.

Trump claims that Indonesia will commit to purchasing US$15 billion (RM63.5 billion) in energy products, US$4.5 billion in agricultural goods, and 50 Boeing aircraft. These are staggering figures, but without a full text of the deal, the motivations, mechanisms and legality of these commitments remain opaque.

But if these details are verified and hold true, they raise troubling questions about fairness, reciprocity and Indonesia’s long-term economic sovereignty. This is not free trade, let alone fair. This is not even managed trade. This is a developing country unilaterally giving preferential access to the world’s most powerful economy, with little to no reciprocal benefit. Such a one-sided deal can never be a bargain and is unheard of in modern trade diplomacy.

The deal, as framed, resembles a perverse inversion of the Generalised System of Preferences (GSP), a scheme meant to help developing nations access wealthier markets in developed countries. For example, under the European Union’s GSP and Everything But Arms arrangements, countries like India, Indonesia and Bangladesh have been granted duty-free and quota-free access for selected products exported to the European single market to promote sustainable economic development and poverty reduction. But in this instance, the scheme is stood on its head, with Indonesia as the donor and the US as the beneficiary — a reversal so stark it borders on absurdity.

By scrapping all tariffs and non-tariff barriers on US goods, Indonesia is effectively handing over key policy options and losing valuable negotiating power. In contrast, the 19% tariff the US slaps on Indonesian exports raises trade barriers, leaving Indonesian industries vulnerable and defenceless. Instead of creating a fair playing field, this set-up deepens the existing imbalance and chains Indonesia to a state of structural disadvantage.

More worryingly for Asean, this arrangement could open the door for the US to use Indonesia as a backchannel into the wider regional market, potentially facilitating a surge of transshipped goods to other Asean member states. Over time, such a vulnerability could erode the bedrock of the Asean Economic Community and distort the integrity of intra-regional trade dynamics.

Although rules of origin and trade remedy mechanisms exist, enforcement remains uneven across the region. Limited institutional capacity and persistent resource constraints, common across much of Asean, pose significant hurdles to effective monitoring.

The risk of American goods being dumped in Indonesia and subsequently entering neighbouring markets undetected is, therefore, very real. In the absence of robust tracking systems, duty-free imports into Indonesia may ultimately find their way into proximate countries, such as Malaysia, Singapore and Thailand, and even further afield into the Philippines, Cambodia and Laos, bypassing applicable tariffs and regulatory safeguards.

Not that it’s of any consolation, but Indonesia is just one of many developing economies facing Washington’s increasingly coercive trade demands. In Vietnam’s case, the US agreed to cap tariffs on Vietnamese exports at 20%, and 40% on goods suspected of transshipment, down from the previously threatened 46%. In exchange, Washington gained “total access” to the Vietnamese market, with Trump declaring that US exports to Vietnam would face zero tariffs.

Yet, beyond avoiding immediate penalties, Hanoi received little of substance. The concessions extracted by the US covered sensitive areas, such as technology standards, digital trade and regulatory alignment. Vietnam, meanwhile, was left with nominal perks, such as a market economy designation, symbolic at best, with no clear or tangible gains to offset the structural asymmetry of the deal.

Meanwhile, India and the US are engaged in ongoing negotiations, with Trump signalling optimism. And Trump is certainly drinking to New Delhi’s reported offer of deep concessions, including slashing tariffs on bourbon whiskey from 150% to 100% and exploring reductions on more than 55% of US exports. Nonetheless, it remains to be seen whether this preemptive capitulation will avert looming reciprocal tariffs of up to 26% on Indian goods.

Brazil, for its part, was hit with a sudden escalation of tariffs, rising from a baseline of 10% to a punitive 50% on all its exports to the US, effective Aug 1. This move was ostensibly in retaliation for domestic legal proceedings involving former president Jair Bolsonaro and was widely perceived as a coercive tactic by Washington. In response, President Lula invoked Brazil’s Economic Reciprocity Law and vowed to impose matching tariffs if negotiations fail and no deal is reached.

These episodes are clear signs of transactional pressure wielded through economic might, damaging multilateral norms, erasing domestic policy autonomy and deepening dependencies for developing economies under volatile US trade whims.

What sticks out is Trump’s political game plan. By opting to raise tariffs, he sidesteps the Congressional oversight required under the Trade Promotion Authority, which mandates legislative approval for trade deals that liberalise market access. Tariff hikes, by contrast, can be imposed unilaterally under existing executive powers, allowing Trump to reshape trade terms without Congressional input.

For Trump, this is a tactical win: a symbolic “America First” knockout blow scored without legislative meddling. However, for Indonesia, the picture is much murkier. Unlike the US, Indonesia must go through domestic processes, including possibly parliamentary or ministerial scrutiny, to amend its tariff regime. This consumes political capital and risks triggering domestic backlash.

The nature of the proposed US$19.5 billion in Indonesian purchases also warrants closer review. Are these market-driven commercial transactions or state-led procurement pledges that may involve the use of public funds? If it is the latter, Indonesia risks distorting its own domestic market by possibly sidelining local suppliers and prioritising imports. At the same time, it would be extending preferential procurement access without securing comparable privileges in return.

More broadly, the deal sets an alarming precedent. It rewards US hardball tactics, even coercive diplomacy, and signals that developing countries can be pressured into accepting lopsided arrangements. It also arms the US with a rhetorical cudgel: “Indonesia agreed, after Vietnam, and so has India. Why can’t you?”

As a red flag to Malaysia’s authorities, it bears stressing that in the pursuit of short-term gains or geopolitical favour, developing economies must guard against sacrificing valuable policy space and hard-won trade principles enshrined in the WTO, such as the provisions on Special and Differential Treatment. Deals like this risk eroding the flexibilities accorded in the multilateral trading system, undermining domestic industries, weakening procurement sovereignty and compromising a country’s ability to negotiate effectively in future trade talks.

Before declaring such deals victories, we must ask: a win for whom, and at what cost? More importantly, can the Global South still claim strategic autonomy if we keep conceding ground in the name of cooperation? And how much more policy space must we give up before we start drawing the line?

This isn’t the moment for symbolic victories. Vietnam was the first to blink and now Indonesia is bending backwards. India appears to be staggering on the precipice of surrender. And yet, while Brazil has been among the hardest hit, it looks like they are holding on fast to their guns. Needless to say, China hasn’t budged an inch. This is crucial to send the message that the Global South must stop mistaking access for agency. It’s time we moved beyond pleading for inclusion and began asserting leadership, not from the sidelines but from the centre. Anything less may well be capitulation masquerading as diplomacy.