Executive Overview and Context
The ART creates potentially valuable market-access and investment openings, but its business value depends on three unresolved variables: whether the U.S. tariff architecture survives legal challenge, whether Indonesia completes domestic ratification, and how companies manage the sovereignty, climate, and ESG risks embedded in implementation.
On 19 February 2026, Indonesia and the United States signed the Agreement on Reciprocal Trade (ART) in Washington. The deal was sold as a “historic” USD 33 billion package that would secure market access, cut tariffs, and deepen economic ties across manufacturing, agriculture, and digital trade.
Under the ART, Indonesia agreed to remove tariffs on over 99 percent of US products, while the US kept a 19 percent “reciprocal” tariff on Indonesian exports, with zero tariffs on 1,819 specific Indonesian product lines such as palm oil, coffee, cocoa, rubber and certain textiles.
The agreement also bundled indicative commercial arrangements for US energy, agricultural products, and aircraft worth roughly USD 33 billion over several years, including roughly USD 15 billion in energy and around 50 aircraft valued at about USD 13.5 billion.
What’s Changed Since Signing
Within 24 hours, the legal ground under the deal began to shift. On 20 February 2026, the US Supreme Court, in Learning Resources, Inc. v. Trump, ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, undermining the legal basis for the 32 percent tariff threat that pushed Indonesia to negotiate the 19 percent rate. Washington pivoted to another tool, Section 122 of the Trade Act of 1974, which allows temporary surcharges of up to 15 percent, and then faced a further setback when the US Court of International Trade struck down those Section 122 tariffs for certain plaintiffs.
In Jakarta, the agreement has not yet entered into force. Under the ART, it becomes operational 90 days after both governments certify that their domestic procedures are complete. Indonesia has not yet provided that confirmation, and the government has indicated that ratification would normally proceed through the House of Representatives because of the breadth of the commitments involved.
This Insight explains where the ART stands now and what businesses should do with that uncertainty. It assesses the main commercial opportunities and risks, the sovereignty and policy-space questions raised by the treaty architecture, and the climate and extractives implications that companies should address before relying on the agreement’s benefits.
The full insight addresses the following in detail:
- The legal footing behind the tariff numbers, including the Section 301 forced-labor duty layered on top
- Non-tariff barriers, regulatory shortcuts, and digital trade commitments under the ART
- What the deal means for Indonesian exporters, importers, and import-competing sectors
- Implications for foreign investors and FDI strategy, including mining, energy, and critical minerals
- Compliance and risk-management priorities, with a practical checklist for legal and trade teams
- Sovereignty and policy-space concerns, including the asymmetry of “Indonesia shall…” obligations
- Climate and ESG risks tied to critical minerals, fossil fuel purchases, and coal-powered nickel processing
- A practical playbook for businesses: mapping exposure, scenario modeling, and monitoring
- Legal and political scenarios for the next 12–24 months, and the signals to watch
This is an excerpt from the full article, available on the NDP website. Please click here to read the full piece.
