A recent trade agreement between the United States and Indonesia is set to lower prices for Indomie and other instant noodles.
The deal, hailed as a “historic trade deal” by The White House, eliminates Indonesia’s tariffs on over 99% of US goods, including wheat, which is a key ingredient for instant noodles. Meanwhile, the US will reduce its imposed tariff on Indonesian products from an average of 32 percent to 19 percent.
Industry experts anticipate that the removal of tariffs on US wheat will reduce production costs for Indonesian instant noodles, allowing brands like Indomie – currently the second-largest instant noodle brand in Asia, after Japan’s Nissin – to become more competitive.
[See more: The US and China have extended their tariff deadline by an extra 90 days]
Andry Satrio, an economics and finance researcher in Jakarta, noted that the food and beverage industry is still recovering from the pandemic, and lower input costs could stimulate growth. He expressed hope that this would enhance Indonesia’s position in international markets.
Some criticise the trade deal as exploitative as they view it as overly favourable to the US and a threat to the national economy. Indonesia’s top economic minister, Airlangga Hartarto, has defended the trade deal by emphasising that the reduced tariff rate imposed by the US on Indonesian goods is a significant concession. Goods like crude palm oil, cocoa and rubber which are not produced in the US will benefit from even lower concessions.
Although this is the first time Indonesia has granted zero tariffs to the US, this is not the first time Indonesia has signed a free trade agreement. As a member of the Association of Southeast Asian Nations (ASEAN), Indonesia has ongoing free trade deals with places such as Hong Kong, China, Australia and New Zealand.
