- Indonesia and the EU announced a “political agreement” on their trade deal during Prabowo’s weekend Brussels visit;
- Both sides are seeking to mitigate new US tariffs pushing them into each other’s arms;
- Indonesian officials stated the EU is “softening” on EUDR, while Brussels desperately seeks new partners to avoid a trade crisis
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Indonesia and the EU appear to have found new common ground on their decade-old trade negotiations. The announcement came as both sides face Trump’s tariffs – with Indonesia staring down a 32% levy and the EU threatened with 30%.
Indonesian President Prabowo Subianto’s and European Commission President Ursula von der Leyen Sunday “political agreement” on the Comprehensive Economic Partnership Agreement (CEPA) reads like it is intended to avoid economic potholes as the US abandons both Southeast Asia and Europe.
The timing is no coincidence. Trump’s letters to a slew of trading partners, tweaking tariff levels proposed in April and inviting them to further talks. Indonesia’s 32% tariff kicks in August 1, while the EU faces its own 30% deadline on the same date if it can’t strike a deal with Washington.
Perhaps most telling is what Indonesia’s Trade Minister Budi Santoso said in Brussels: “As the IEU-CEPA nears completion, we’ve observed a more flexible position from the EU, including on the EUDR”. He added that “this shift likely reflects the EU’s willingness to build a long-term partnership with Indonesia”.
Faced with Trump’s tariffs, Brussels is discovering “flexibility” on the regulation it has defended for years.
If true, this represents a shift. Just weeks ago in the June bilateral meetings, Indonesia was attacking the EUDR as a unilateral imposition threatening 8 million smallholders. Now, with both sides desperate to avoid Trump’s trade war, the EU appears willing to offer what Airlangga called “special treatment” on deforestation rules.
The EU’s urgency reveals how rattled Brussels is by Trump’s return. EU chief trade negotiator Maros Sefcovic told reporters Monday that “there is this new sense of urgency” in engaging with other countries hit by Trump’s tariffs.
Šefčovič said it will “be almost impossible” for the bloc to continue its current level of trade with America if that new tariff rate is implemented. He warned: “If (the tariff) stays 30 (percent) plus, simply trading as we know it will not continue, with huge negative effects on both sides of the Atlantic”.
No wonder Brussels is accommodating to Jakarta.
The EU’s capitulation to Indonesia isn’t just about one deal – it’s about salvaging its Southeast Asian strategy. With trade talks with Malaysia stalled since 2012 and negotiations with Thailand and the Philippines just beginning, Brussels needs a win.
An Indonesia deal could serve as the pressure point for other ASEAN nations. If Jakarta can extract EUDR concessions, why can’t Kuala Lumpur or Bangkok?
The Commission appears to be betting that demonstrating “flexibility” with Indonesia will unlock the regional logjam. EU competition chief Teresa Ribera told Bloomberg TV on Monday: “We need to explore how far, how deep we can go in the Pacific area with other countries”.
Von der Leyen’s weekend dash to seal the Indonesia deal – complete with promises of duty-free access and “special treatment” on environmental rules – shows the Commission is seeking to get ahead of internal opposition. The message to EU member states is clear: approve these deals quickly or face economic catastrophe.
Austrian trade minister Wolfgang Hattmannsdorfer captured the mood: “I support the Commission in its efforts to form global partnerships, alliances with other countries that are threatened by US tariffs. Together we can raise the pressure exerted on the US”.
While the EU hasn’t officially abandoned the EUDR, Indonesia’s claims of a “softening” stance suggest the regulation may become another casualty of Trump’s trade wars. Faced with choosing between environmental virtue signaling and economic survival, Brussels appears to be choosing the latter.
For Indonesia and other producer countries, Trump’s tariff threats may have accomplished what years of diplomatic protests couldn’t: forcing Brussels to acknowledge that its unilateral environmental regulations are luxury items it can no longer afford.
The Indonesia deal set for formal signing in September 2025. However, it’s worth noting that a last-minute change from Brussels could still derail the process.