JAKARTA: Indonesia and the EU finalized negotiations for a Comprehensive Economic Partnership Agreement on Tuesday, securing a deal that removes tariffs on nearly all goods amid US President Donald Trump’s trade war.

Indonesia’s chief Economic Minister Airlangga Hartarto and EU Trade Commissioner Maros Sefcovic jointly announced a “substantive conclusion” of the Indonesia-EU CEPA in Bali, after over nine years of talks.

“Today, we mark an important milestone (in) the longstanding partnership between Indonesia and the EU … (This) CEPA is a new era in our bilateral relations,” Hartarto said during the signing ceremony.

“As we look ahead for the next stage — the legal scrubbing, translation, ratification — we reaffirm (our) determination to bring this CEPA into force at the earliest opportunity. The target should be the first of January 2027.”

The agreement removes import duties on 98.5 percent of tariff lines, the EU said in a statement. 

In a separate statement, Indonesia’s Coordinating Ministry of Economic Affairs said both sides have committed to removing over 98 percent of tariffs on around 99 percent of imports. Once enforced, Indonesian goods will immediately be subject to zero tariffs in about 90 percent of the EU market, with further tariff reductions to follow in stages. 

“By eliminating over 98 percent of tariffs, it will ignite growth across key sectors from Indonesia’s palm oil, textile and footwear industries to the EU’s agrifood and automotive sectors,” Sefcovic said.

The agreement, which also seeks to boost digital trade and includes integration of supply chains in the raw materials sector, will require the approval of Indonesia’s legislature as well as EU member states and the European Parliament before it comes into force.

In 2024, Indonesia-EU trade stood at about $30.1 billion, according to Indonesian government data. Southeast Asia’s biggest economy is expecting its exports to the EU to increase by 60 percent upon the CEPA implementation.

“(This is) a time marked by disruption, uncertainty and rapid change. Yet today, by finalizing this agreement, the EU and Indonesia are sending a powerful message to the world — that we stand united in our commitment to open rules-based and mutually beneficial international trade,” Sefcovic said.

The pact comes amid tariffs imposed by the US, which stand at 19 percent on Indonesian exports and 15 percent on EU exports.

The impact of Trump’s tariffs is expected to be most felt in labor-intensive sectors, including Indonesia’s textile, apparel and garment industries, which employ millions of people.

“We have long been partners with the EU, so this IEU-CEPA is going to expand and accelerate trade flows between the two sides,” Nailul Huda, director of economy at the Jakarta-based Center of Economic and Law Studies, told Arab News.

“This also means the textile industry will not be dependent on the US market, which is applying reciprocal tariffs. The same is the case with palm oil, which is getting import duty relief from the EU.”