Beyond Tariffs: EU and Indonesia Seek Common Ground Through CEPA

By Nadira Wulandari

Cover Image Attribute: Indonesian President Prabowo Subianto and European Commission President Ursula von der Leyen declared a "political agreement" to finalize a free trade deal on July 13, 2025. / Source: Facebook/Prabowo Subianto

 On July 13, 2025, in Brussels, the European Union and Indonesia took a significant step toward strengthening their economic ties by announcing a political agreement on the Comprehensive Economic Partnership Agreement (CEPA). European Commission President Ursula von der Leyen and Indonesian President Prabowo Subianto stood side by side at a press conference, their words carrying a sense of cautious optimism about what this deal could mean. “There’s a lot of untouched potential in our trade relationship, and therefore this agreement comes at the right time because the new agreement will open new markets,” von der Leyen said, pointing to opportunities in agriculture, automotive, and service sectors. Subianto, speaking with a tone of conviction, added, “We consider Europe to be very important to us. That’s why we would like to see more European presence and more European participation in our economy.” This moment comes at a time when global trade feels like a high-stakes chess game, with the United States’ recent 30% tariffs on EU and Mexican imports, effective August 1, 2025, pushing the EU to seek new partners. 
The journey to this agreement has been a long one. Since 2016, negotiators have been hashing out the details of the CEPA, wrestling with thorny issues like palm oil trade and Indonesia’s nickel export policies. The numbers tell part of the story: in 2024, bilateral trade between the EU and Indonesia hit €30.1 billion, with the EU exporting €10.8 billion worth of goods—think machinery, chemicals, and mechanical appliances—and importing €19.3 billion, largely palm oil, mineral fuels, and animal or vegetable fats. The EU’s foreign direct investment in Indonesia stood at €25.1 billion in 2023, dwarfing Indonesia’s €1.1 billion in the EU. These figures paint a picture of a relationship already substantial but brimming with untapped possibilities, especially as both sides look to shield their economies from global turbulence.
For the EU, this deal is about more than just numbers—it’s about finding steady ground in a world where trade rules seem to shift daily. Von der Leyen put it plainly: “We’re living in turbulent times and when economic uncertainty meets geopolitical volatility, partners like us must come closer together.” By delaying retaliatory tariffs against the U.S., the EU is signaling strategic restraint—aiming to keep diplomatic channels open while advancing agreements like CEPA to strengthen resilience. Indonesia, with its nearly 300 million people and its position as Southeast Asia’s economic powerhouse, is an appealing partner. It’s a market where European companies can sell cars, farm products, and services, and a place to invest in a region that’s becoming a global economic hub.
For Indonesia, the CEPA is a chance to get its goods—palm oil, textiles, footwear, seafood—into European markets without the burden of tariffs. Indonesia’s Trade Minister Agus Subianto made this a priority during his Brussels visit, and the stakes are high. A 2025 analysis from Indonesia’s trade ministry estimated a 5.4% export boost from the deal, but Senior Economic Minister Airlangga Hartarto thinks that’s modest, aiming for a 50% jump in three years. Palm oil, a cornerstone of Indonesia’s economy, has been a sticking point because of the EU’s strict anti-deforestation rules. These rules aim to ensure sustainable supply chains, but they’ve sparked tension, as palm oil production often raises environmental red flags. Subianto, speaking in Brussels, called the agreement a “breakthrough” in addressing these issues, saying, “For Indonesia, CEPA is not only about trade, it is about fairness, respect, and building a strong future together.” His words reflect a hope that this deal can align economic ambition with environmental responsibility, though that’s easier said than done.
There’s a deeper meaning to this agreement, too. Subianto called it “a right example” for a world caught in “instability or confusion,” suggesting it could be a model for cooperation when protectionism is on the rise. The EU sweetened the deal by easing visa rules for Indonesians, with von der Leyen noting, “The EU also relaxed the visa regime applied to Indonesian nationals so that it will be easier for them to visit, invest, or study in the EU.” It’s a small but meaningful gesture—imagine Indonesian students exploring European universities or businesspeople traveling more freely to strike deals. These human connections could strengthen the partnership beyond trade statistics.
But let’s not get carried away. This is a political agreement, not a done deal. Negotiators, led by EU Trade Commissioner Maros Sefcovic and Indonesia’s Airlangga Hartarto, have until September 2025 to iron out the fine print. That’s no small task when you consider the sticking points, like ensuring Indonesia’s palm oil exports meet the EU’s environmental standards. Von der Leyen emphasized sustainability, stating, “No sólo queremos un suministro seguro, sino un suministro responsable, y es lo que tenemos en común. (EN: We not only want a secure supply, but a responsible one—and that is what we have in common.)” For Indonesia, aligning with these standards could mean tough changes for its palm oil industry, which supports millions of livelihoods. The EU’s push for responsible trade is admirable, but it puts pressure on Indonesia to overhaul practices in ways that might not sit well at home.
The global context makes things trickier. The ripple effects of U.S. tariffs have intensified market volatility, and the EU’s consideration of countermeasures—should talks with Washington fail—reflects how tense the landscape is. Let's be honest, Indonesia isn’t immune either: the U.S. has announced a 32% tariff on its goods, effective August 1, 2025, unless a bilateral trade agreement is reached. Meanwhile, Indonesia is juggling other trade negotiations, including a free trade agreement with the Eurasian Economic Union scheduled for December 2025. It’s like trying to keep multiple plates spinning while the table wobbles. These external pressures could push the CEPA forward faster, but might also complicate things if Indonesia feels squeezed from all sides.
Economically, the CEPA holds game-changing potential. For the EU, Indonesia’s expanding market offers rich opportunities in automotive, agriculture, and services. EU leaders anticipate that the agreement will unlock new commercial avenues in these key sectors—consistently emphasized by von der Leyen throughout the negotiations. For Indonesia, the deal promises to attract increased EU investment in renewables, semiconductors, and mineral derivatives—priority sectors identified by trade official Djatmiko Bris Witjaksono in June 2025. EU investments in Indonesia hit €1.1 billion in 2024, but that’s down from previous years, hinting at room to grow. Still, hitting that 50% export increase Indonesia dreams of won’t be easy. It’ll take smooth logistics, regulatory alignment, and a lot of political will to make it happen.
Geopolitically, this deal is part of a bigger puzzle. The EU’s chasing trade agreements with India, Malaysia, Mercosur, and Mexico to diversify its partnerships, especially as tensions with the US and China grow. Indonesia, a linchpin in ASEAN, is a key piece of that strategy. Subianto captured this when he said Europe is “a very important factor” for global stability, though he was careful to nod to the US, noting, “The United States will be always a very important leader in the world.” It’s a diplomatic tightrope—Indonesia wants to deepen ties with the EU without alienating other powers. The CEPA, in this sense, isn’t just about trade; it’s about carving out a stronger role in a world where economic and political lines are constantly redrawn.
Still, the road ahead is bumpy. The CEPA needs approval from the EU’s 27 member states and the European Parliament, where environmental concerns could spark pushback. In Indonesia, meeting EU standards might mean politically tough reforms, especially in the palm oil sector. The Jakarta Post noted Subianto’s Brussels trip was partly about dodging US tariff threats, which suggests Indonesia’s urgency might be as much about survival as ambition. If either side feels the deal tilts too far one way, negotiations could stall.
In the end, the EU-Indonesia CEPA deal is a promising but fragile step toward closer ties. For the EU, it’s a chance to tap into Indonesia’s vibrant market and secure a foothold in ASEAN. For Indonesia, it’s about boosting exports and drawing investment while navigating environmental demands. The evolving trade relationship shows what’s possible, but turning this agreement into reality will take hard work. As von der Leyen and Subianto made clear, this is about partnership in a world that feels increasingly unsteady. Whether it delivers fairness, respect, and shared growth depends on what happens next—on both sides finding a way to balance ambition with reality. 
With reporting by the Jakarta Post. Politico and Reuters.

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