Southeast Asian countries are moving closer to the European Union (EU), seeking a reliable trade partner in the face of steep tariffs imposed by the Trump administration.
Indonesian President Prabowo Subianto and European Commission president Ursula von der Leyen reached a political agreement on July 13 to move ahead on a comprehensive economic partnership agreement (CEPA). A finalized deal is expected in September.
“We would like to see more European presence and more European participation in our economy,” said Prabowo during a joint press conference.
Under the deal, tariffs would be eliminated for 80% of Indonesian exports to the EU within one or two years of the agreement coming into effect, according to the Indonesian government.
Indonesia’s exports to the EU would increase by an estimated 58% within three years of the agreement going into force, government projections show, boosting the country’s gross domestic product by 0.19 percentage points.
Indonesia began CEPA negotiations with Europe in 2016, but talks stalled as the two sides struggled to reach a compromise on trade controls and environmental measures. US President Donald Trump’s so-called “reciprocal” tariffs were the catalyst that has since accelerated the talks.
Indonesia faces a 32% tariff from the US, which accounts for 11% of the country’s exports, making it the second biggest importer of Indonesian goods after China.
With a slowdown in exports to the US looming, engaging with the EU has become a key priority. The bloc is Indonesia’s fifth largest export market, taking in 7% of the country’s goods.
The EU mainly imports palm oil, copper ore and rubber products from Indonesia. The trade deal with the EU will be a critical driving force amid rising uncertainty in the global economic landscape, said Airlangga Hartarto, Indonesia’s coordinating minister for economic affairs.
Southeast Asian countries have struggled to strike tariff deals with the Trump administration. As of July 9, the initial deadline for negotiations, only a few countries such as Vietnam and Cambodia have been able to reach agreements to reduce the duties.
The rate declared for Thailand remains at 36%, while tariffs targeting Malaysia and the Philippines were recently raised to 25% and 20%, respectively.
The EU accounts for 9% of all exports from the Association of Southeast Asian Nations (ASEAN), making it the ten-member bloc’s third largest market outside of the region after China and the US However, Vietnam and Singapore are the only ASEAN members to have struck trade agreements with the EU.
Other ASEAN countries are engaging in trade negotiations with the EU to diversify export destinations.
Thailand completed its sixth round of trade agreement talks with the EU at the end of June, and has indicated plans to conclude the negotiations by the end of the year.
“Given the global geopolitical and economic uncertainties, Thailand and the EU reaffirmed their commitment to being reliable and predictable trade partners,” said then-Thai commerce minister Pichai Naripthaphan at the time of the latest talks in Bangkok.
The EU is Thailand’s fourth largest trading partner. Trade agreement negotiations between the two began in 2013, but stalled following the Thai military’s takeover of the government. Talks resumed in 2023.
Malaysia announced in January that it would resume negotiations on a trade deal with the EU. The first round of talks took place from late June to early July.
Malaysia had suspended negotiations in 2012 due to disagreements over EU measures affecting palm oil suppliers. The Philippines also resumed talks with the EU in October 2024, with plans to conclude a deal by 2027.
The EU is rapidly diversifying its trading partners and supply chains, amid the isolationist moves of the US and ongoing economic security threats posed by China.
“We’re living in turbulent times, and when economic uncertainty meets geopolitical volatility, partners like us must come closer together,” said Von der Leyen at July 13’s joint press conference.
ASEAN has set a goal of becoming the world’s fourth largest economic bloc by 2045. The EU has also repeatedly expressed its willingness to expand cooperation with Japan and other member states of the “Comprehensive and Progressive Trans-Pacific Partnership Agreement” (CPTPP).
The EU seeks to work together with trading partners not only on mutual tariff reductions but also on creating new rules for freer trade. The US tariff policy appears to be sparking a movement to establish a world order for trade that leaves out the US.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.