Indonesia and the European Union (EU) will sign the Indonesia-EU Comprehensive Economic Partnership (IEU-CEPA) trade agreement on Tuesday, September 23, 2025. This marks a government success after nearly a decade of intense negotiations. The agreement is a new strategy for both parties to mitigate the impact of U.S. President Donald Trump’s tariff policies. The agreement, to be signed in Bali, brings Indonesia and the 27-member bloc into a broader economic relationship. It’s worth noting that the IEU-CEPA is the third trade agreement signed by the EU with Southeast Asian countries, after Singapore and Vietnam. Here are five things to know:
Urgency: Indonesia has been in talks with the EU since 2016. But negotiations for a trade deal initially showed little progress. However, in July, President Prabowo Subianto traveled to Brussels and announced with EU President Ursula von der Leyen that the two sides had reached a “political agreement” to finalize the deal after 19 rounds of negotiations. Indonesia’s Coordinating Minister for Economic Affairs, Airlangga Hartarto, said the uncertainty caused by “tariff wars and protectionism” between major economies is driving both sides “to seek certainty through stable bilateral agreements.”
“This agreement is expected to mitigate the risks from the impact of a global tariff war,” Airlangga said.
Tariffs Eliminated: Approximately 80% of Indonesia’s exports to the EU will be tariff-free once the agreement comes into force. This is expected to benefit Indonesia’s main exports to the bloc, including palm oil, footwear, textiles, and fisheries. Von der Leyen said in July that the agreement would open new markets. It would also help strengthen Europe’s supply chains of critical raw materials to support the clean and digital transition.
“We don’t just want secure supply, but we want responsible supply,” she said.
“That means respect for the environment, respect for local communities, and a clear focus on good jobs and the creation of local added value.”
Benefits: The EU is Indonesia’s fifth-largest trading partner, with bilateral trade reaching US$30.1 billion (IDR 500 trillion) last year. The agreement will further open the EU’s access to the Indonesian market, which has a population of around 280 million.
“With the CEPA, it will be easier for them (the EU) to enter Indonesia,” said Deni Friawan, a researcher at the Center for Strategic and International Studies (CSIS), emphasizing the size of the market and its economic growth, as reported by AFP.
Green Policy: It should be noted that relations between Indonesia and the EU have been tense. Several issues have caused tension, such as the EU’s proposed import ban on products linked to deforestation, which has angered Indonesia, a major palm oil exporter. Under EU deforestation regulations, exports of a wide range of goods — including soybeans, timber, palm oil, livestock, printing paper, and rubber — are banned if produced on land deforested after December 2020.
EU Trade Chief Maros Sefcovic has promised to provide “preferential treatment” regarding deforestation regulations for countries that have signed a trade agreement with the bloc. The EU has delayed the implementation of the rules until later this year after facing resistance. Brussels is reportedly pushing to include provisions on deforestation in the agreement, but details have not been made public.
Next Steps: After signing the agreement, both sides are expected to implement steps, including legal checks and translations of official documents. The agreement must then be ratified by EU members, the European Parliament, and the Indonesian parliament, and is expected to be implemented by 2027.
September 22, 2025, CNBC Indonesia
(https://www.cnbcindonesia.com/news/20250922134736-4-669093/top-prabowo-perjanjian-dagang-ieu-cepa-tanda-tangan-besok-di-bali)