With 40 per cent of Indonesia’s textile and clothing exports going to the US market, the country’s textile sector is expected to be one of the most severely impacted by the recent tariff increases in the US.
Industry participants caution that a 32 per cent so-called “reciprocal” tax that will be applied to Indonesian imports after a 90-day pause for bilateral talks ends may “accelerate layoffs” in a sector that was already having difficulties before the policy was introduced.
Associations representing the textile sector have proposed boosting imports of US-sourced raw materials, such as cotton, as a negotiating tool to balance bilateral trade, maybe reduce the impending tariff, and safeguard the home market by limiting imports.
Due to either little market demand or fierce rivalry from local competitors in target nations, efforts to diversify Indonesian exports outside of the US are considered impractical in the near future.
According to Redma Gita Wirawasta, chairman of the Indonesian Filament Yarn Producers Association (APSyFI), around 40 per cent of the industry’s total exports, primarily in the form of completed goods, were sent to the United States. After China, India, Vietnam, and Bangladesh, Indonesia is currently the fifth-largest supplier of textiles and clothing to the United States.
He cautioned that Indonesia’s ability to offer competitive prices in the US market may be weakened by the recent US tariffs. At the same time, nations subject to even higher reciprocal tariffs may begin to shift their excess supply to Indonesia, which could result in an overabundance of lower-priced commodities on the local market.
Redma, however, advised against increasing exports during this time frame because doing so could exacerbate the US trade deficit with Indonesia, which was the original reason for the tariff policy.
Instead, he urged the administration to prioritise diplomacy by resolving regulatory obstacles that could impede trade and pledging to increase imports of US goods.
The APSyFI suggests that the government exploit imports of cotton as a strategic negotiating chip in trade negotiations, in conjunction with the Indonesian Textile Association (API).
Textile groups counter that it won’t be simple to leave the US. The US continues to be a vital market as the world’s largest consumer of textile goods, supported by its enormous economy.
Exporting to other significant textile producers, such as China, India, Vietnam, and Bangladesh, is not a feasible option since those nations apply their own trade obstacles to protect domestic businesses, said Ian Syarif, deputy chairman for industrial affairs at the API.