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EU and Indonesia Seal Trade Pact in Push to Diversify Supply Chains

13 Oct 2025

EU and Indonesia Seal Trade Pact in Push to Diversify Supply Chains

Recently, the European Union and Indonesia have finalised a trade agreement following nearly a decade of negotiations, marking a significant step in the EU's strategy to diversify its supply chains and access new markets. 

This agreement with Southeast Asia's largest economy comes amid a broader acceleration of EU trade talks with partners worldwide. The push has gained momentum as US President Donald Trump seeks to reshape transatlantic relations on American terms, prompting the bloc to reduce its economic reliance on the United States.

European officials have intensified engagements with several of the world's major economies. These efforts include ongoing negotiations with India, a concluded trade deal with the South American Mercosur bloc—comprising Brazil and Argentina—and heightened talks with Southeast Asian nations such as Vietnam, the Philippines, and Thailand.

The EU-Thailand negotiations, which began over a decade ago, were previously stalled following a military coup in 2014 due to the EU's policy of not engaging with the military government. Talks only resumed in 2023, with an aim to reach an agreement by the end of 2025. Several key issues remain unresolved, and a final deal is now anticipated sometime next year.

In contrast, negotiations with Indonesia were successfully concluded after a comprehensive bilateral political agreement was reached in July.

Indonesia represents a key economic partner for the EU. It is Southeast Asia's largest economy, characterised by sustained growth, a substantial consumer base of 300 million people, and significant potential as a source of raw materials.

However, the bilateral relationship has faced strain from the EU's deforestation regulations. These rules are designed to curb deforestation overseas driven by EU demand for key commodities, including palm oil and coffee. Indonesia has been among the most vocal critics of these regulations.

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