Peru–Indonesia Trade Diplomacy: CEPA Momentum Amid U.S. Tariff Pressures

Strategic Overview

Peruvian President Dina Boluarte and Indonesian President Prabowo Subianto held talks in Lima on Monday, advancing a shared strategy to strengthen bilateral trade ties in the face of mounting external pressures. With Washington recently imposing tariffs of 19% on Peru and 10% on Indonesia, the meeting was framed as both defensive and forward-looking. At its core was the Comprehensive Economic Partnership Agreement (CEPA), which both sides signed in principle in May and are expected to formalize soon. The deal would open greater access to markets and position Peru as Indonesia’s bridge into Latin America while offering Peru a strategic gateway into Southeast Asia’s fast-growing economies. Both leaders highlighted food security, energy, mining, fisheries, and defense as key cooperation areas, while stressing the importance of sustainable development and South-South solidarity. For both countries, the CEPA represents a potential trade lifeline and a counterweight to rising global protectionism.

Operational Context

The Tariff Shock: President Trump’s tariff regime has forced mid-sized economies to accelerate diversification strategies. Both Peru and Indonesia face heightened exposure, with agriculture and manufactured goods particularly vulnerable.

The CEPA Framework: The trade pact promises tariff elimination across key categories, expanded market access, and commitments to food security, sustainable development, and South-South solidarity. For Indonesia, the deal consolidates a $290 million trade surplus powered by automobiles, footwear, and biodiesel exports. For Peru, it offsets recent declines in bilateral trade (from $554 million in 2022 to $444 million in 2023).

The Partnership Pitch: Boluarte emphasized CEPA as a reaffirmation of rules-based trade and Latin American openness, while Subianto linked the deal to ASEAN-Peru cooperation, signaling intent to expand ties beyond bilateralism into multilateral frameworks such as the TPP and ASEAN.

Geopolitical Tensions

South-South Dynamics: The deal is emblematic of the pivot by developing economies to build resilience outside Western-dominated trade structures. Peru’s role as a Pacific Alliance and TPP member makes it an attractive partner for Indonesia, while Indonesia’s position in ASEAN offers reciprocal benefits.

U.S. Factor: Tariffs imposed by Washington serve as both a challenge and a catalyst. While the measures threaten short-term export revenues, they accelerate the incentive for Peru and Indonesia to institutionalize trade cooperation independent of U.S. preferences.

China’s Shadow: Both Lima and Jakarta remain active Belt and Road partners. CEPA could balance Chinese leverage by creating alternative trade flows—but may equally reinforce Beijing’s ability to triangulate influence via regional blocs.

Strategic Outlook

Baseline: CEPA is poised for ratification within the next quarter. Both governments see political and economic dividends in signaling commitment to open trade despite U.S. headwinds.

What to Watch (2–4 weeks):

• CEPA Signing Ceremony: Track timing and scope; whether sensitive sectors like mining and fisheries are fully liberalized.
• TPP Dynamics: Peru could champion Indonesian accession talks into the TPP framework, a significant shift in the bloc’s reach.
• ASEAN–Latin America Nexus: Monitor whether Peru–Indonesia coordination catalyzes broader ASEAN-Pacific Alliance institutional links.
• U.S. Retaliation: Watch for secondary tariff measures or diplomatic pushback from Washington as CEPA is finalized.

Implications

For Peru:

• CEPA could revive declining trade with Indonesia and anchor Lima as ASEAN’s preferred entry point into Latin America.
• Diversification into Southeast Asian markets provides a hedge against U.S. trade volatility.
• Domestic exporters in agriculture, fisheries, and mining stand to benefit from expanded access.

For Indonesia:

• Reinforces Jakarta’s strategic positioning as both an ASEAN leader and global South connector.
• Expands its role as a gateway for Latin American goods into Asia, cementing its surplus trade advantage.
• Symbolically affirms Subianto’s intent to balance ties with U.S., China, and South-South partners.

For the U.S.:

• Tariffs designed to pressure may backfire by driving deeper South-South cooperation and weakening U.S. leverage in Latin America and Southeast Asia.
• Washington risks alienating two mid-sized partners whose alignment could eventually dilute U.S. economic influence in both regions.