As the United States’ import tariffs take effect, Yoseph Billie Dosiwoda, Executive Director of the Indonesian Footwear Association (Aprisindo), said it is still too soon to gauge the full impact on the domestic footwear industry. What is certain, he said, is that the burden will be substantial.
“It will certainly be heavy,” he said, adding that Aprisindo is awaiting further information from exporters now that the tariffs are officially in place.
Billie said the association is gathering input from member companies exporting to the United States to assess the effects. As a labor-intensive sector employing about 960,000 workers directly and involving 1.3 million people in its supporting ecosystem, the industry’s viability is highly sensitive to foreign trade tariffs.
In 2024, Indonesia’s footwear exports to the U.S. reached US$2.39 billion.
To anticipate the impact, Aprisindo is benchmarking Indonesia’s tariff position against competitors. “If ours is higher than Vietnam’s—which is lower—there’s no point; we lose. The bottom line is our tariff must be lower than competitors such as Vietnam, Cambodia, Taiwan, even China and Hong Kong,” Billie said.
He added that international buyers will weigh product quality, not just tariffs. “Indonesian workers have a quality edge in making footwear carefully and neatly,” he said.
In his view, moderate import tariffs combined with high quality would give Indonesia room to capture market opportunities. Aprisindo hopes the tariff policy will accelerate structural reforms at home.
Billie stressed the need for rapid, coordinated deregulation across ministries and agencies. He cited the importance of easier licensing, environmental impact assessments (AMDAL), SNI compliance, access to renewable energy, smoother export–import procedures, and regulatory certainty on minimum wages.
We need government incentives—electricity discounts, tax relief, and access to renewable energy such as affordable up-front solar panels. Those can help offset the production burden from the tariff
He added that incentives will be necessary if the 19% tariff applies to Indonesia. “If other countries can produce more cheaply, buyers will go there. We need strategies to keep our production costs competitive,” he said.
Negotiations Continue
The United States government on 7 August 2025 officially imposed a 19% import tariff on Indonesian products. Trade Minister Budi Santoso said that although the tariff is now in force, the government is still trying to persuade the U.S. to grant lower rates for certain Indonesian commodities that are not produced there.
“We are aiming for 0 percent,” he said, adding that the government is targeting to conclude negotiations before 1 September 2025.
Coordinating Minister for Economic Affairs Airlangga Hartarto stated that the 19% tariff applied to Indonesia is among the lowest in Southeast Asia, outside of Singapore, which received 10%.
Thus, Indonesia still has a strong chance to compete in the U.S. export market—especially compared with India, a key competitor in textiles and textile products (TPT), which faces a 25% tariff. “If the level of playing field is the same, then we just need to improve competitiveness, and several of our commodities that the U.S. does not produce should be given lower tariffs,” Airlangga said.
On the other hand, some Indonesian commodities are subject to zero tariffs, such as copper concentrate and copper cathode. When announcing the 19% tariff on Indonesia, U.S. President Donald Trump said the U.S. was interested in buying copper from Indonesia because of its good quality.
However, the U.S. offer did not immediately attract PT Freeport Indonesia (PTFI). The company, now majority state-owned, said it would continue to prioritize the domestic market.
“The company’s top priority remains meeting domestic industry needs,” said Katri Krisnati, VP Corporate Communications at Freeport Indonesia, as quoted by Antara.
In addition to the domestic market, Katri explained that Freeport Indonesia’s products are currently marketed in Asia, not the United States. Tony Wenas, President Director of Freeport Indonesia, said the company’s largest copper export market is Japan.
Even if entry to the U.S. were tariff-free, Freeport has no immediate plans to shift its market. “As for moving markets? Shipping to America is far, 45 days, while to China it’s only 7 days, and China consumes 50% of the world’s copper,” Tony said.
A Better Deal
The Chairman of the Indonesian Textile Association (API), Jemmy Kartiwa, acknowledged that the reciprocal reduction of import tariffs, from 32% to 19%, indirectly increases the competitiveness of Indonesia’s textiles and textile products (TPT) in the United States. In other words, Indonesian TPT is now more competitive.
Moreover, the U.S. has long been a strategic export market for TPT, with a market share approaching 40%. Jemmy explained that apparel and accessories, both knit and non-knit, are the most sought-after Indonesian TPT exports in the U.S.
So far, Indonesian TPT products in the U.S. market have competed with those from India and Vietnam, but the tariffs imposed by the U.S. on India and Vietnam are relatively high compared with Indonesia.
Vietnam faces an import tariff of 20%, while India faces 50%; Indonesia can capitalize on this momentum by continuously improving TPT quality to attract U.S. consumers. “Indonesia can be considered fortunate to have secured a 19% import tariff compared with competitors,” he told SUAR, 6 August 2025.
Even so, API also urges the government to remain vigilant against a potential surge of imported products entering Indonesia, possibly from Vietnam and India. The government needs to continue protecting domestic producers and limiting incoming imports.
Separately, Eddy Martono, Chairman of the Indonesian Palm Oil Association (GAPKI), said Indonesia is relatively fortunate because its import tariff has been reduced from 32% to 19%. GAPKI still hopes the government will keep negotiating with the United States to bring the rate down to 0%.
Based on GAPKI data over the past five years, Indonesia’s palm oil exports to the United States have shown an upward trend.
According to GAPKI data, Indonesia’s palm oil exports to the U.S. reached 1.5 million tons in 2020, rising to 2.5 million tons in 2023, before easing slightly to 2.2 million tons in 2024. The export value in 2024 was US$2.9 billion, with Indonesia’s market share in the U.S. reaching 89%.
“Palm oil is a primary input for the U.S. food industry, such as margarine, and it cannot be replaced by other vegetable oils,” he told SUAR.
19% Tariff Still a Squeeze
Redma Gita, Chairman of the Indonesian Filament Fiber & Yarn Producers Association (APSyFI), said the cut in U.S. import tariffs from 32% to 19% still creates new pressure on industry players. “Those who previously didn’t pay 19% now have to,” he said.
Even with the reduction, the tariff still affects the competitiveness of Indonesian products.
According to Redma, competitiveness declines because buyers must shoulder the additional duty. However, since many other countries are also affected, some with even higher tariffs, the competitive landscape does not change drastically.
In this situation, he argued, attention should instead turn to the overall decline in U.S. import volumes. “Because the pie gets smaller,” he said.
When U.S. imports fall, the markets typically contested by Indonesia, China, India, and Vietnam also shrink. Consumers in export destinations will pay more, which could dampen demand.
If buyers cannot purchase normal quantities because of the tariff, they will reduce imports. Redma concluded that, overall, U.S. imports will decrease.
Other Factor: Competitive Dynamics
Regarding the tariff impact on the fiber and filament yarn industry, Redma Gita, Chairman of the Indonesian Filament Fiber & Yarn Producers Association (APSyFI), said it is not yet certain whether Indonesia’s exports will automatically decline. He explained that everything depends on competitive dynamics.
If competitor countries such as China and India face higher tariffs, Indonesia has an opportunity to capture the market niches they leave behind. “The extent to which we can seize competitors’ markets will determine whether our exports rise, stay flat, or fall,” he said.
He illustrated: if China controls 60% of a market, then when that market contracts and China’s share drops, an empty space opens. That space, according to Redma, becomes a battleground. Indonesia can move in to fill it, provided it moves quickly and competitively.
Redma mapped the rivals: on the upstream side, Indonesia will compete with Korea, Taiwan, Brazil, and Turkey to capture market share vacated by China. On the downstream side, Indonesia will face Vietnam, Cambodia, and Sri Lanka. The final outcome of Indonesia’s exports to the U.S. will depend heavily on this competition.
Indonesia faces a complex situation. On one hand, a decline in exports remains possible. On the other, there is room to grow if Indonesia can fill the gaps left by competitors.
The downstream sector is seen as the most vulnerable because of its large export value to the U.S. “It should be able to increase,” he said, referring to the potential to take over buyers that typically transact with China.
Citing Statistics Indonesia (BPS) data, Redma said Indonesia’s downstream exports to the United States reached about US$4.8 billion in 2024, of which roughly 60% came from garments/apparel—nearly US$3 billion. This, he noted, is the most critical area in facing the tariff policy.
Seeking Replacement Markets
Exploring alternative markets is also a strategy that needs to be pursued, though it is far from easy. When China loses access to the U.S. market due to high tariffs, it will also look for other markets. This creates the potential for direct clashes with Indonesia in new arenas. “We will have to compete with Chinese goods,” he said.
Chinese goods are known to be cheaper. In new markets, this price advantage becomes a challenge. Redma said the only market Indonesia can relatively dominate is the domestic market. However, even at home, Chinese goods remain a threat because there is no effective protection.
“They are overstocked. Because shipments to the United States are hit with high tariffs, it’s quite possible they will shift their sales to Indonesia,” he said.
In the domestic market, most products are dominated by small and medium industries (IKM). If cheap imports enter without barriers, IKMs will be directly affected. “This must be the government’s concern,” Redma said, emphasizing the need for protection for domestic producers.
So far, the government has various import-restriction regulations such as Permendag 8, Permendag 36, and the latest revision, Permendag 17. However, Redma believes these rules have not worked effectively. He noted that over the past five years, legal imports have continued to rise. “The government has the tools, but those tools are what are killing domestic industry,” he said.
The import quotas being granted keep rising, even as local producers’ capacity utilization declines.
The Ministry of Industry, as the agency that regulates import quotas, is also seen as failing to perform its protective function. Redma said import quotas continue to increase even though local producers’ utilization is falling.
The fallout, he warned, will hit small and medium industries (IKM): some will see inventory pile up, some will go bankrupt, and others will be able to operate only part of their machinery. “Some have five machines, but only two are running,” he said.
For that reason, APSyFI argues that protection policies must be enforced seriously—such as anti-dumping and safeguard measures. These instruments allow the government to impose additional import duties on goods sold below market prices. “Whatever the tools, if the government isn’t serious, they won’t work,” Redma said.
Beyond protection, Redma believes the government must provide incentives so industry can compete with imports. The most effective incentives are those that directly lower production costs, such as removal of VAT, and subsidies for electricity, gas, and interest rates. He considers income tax cuts to have little impact on industry. The government also needs to calculate realistic incentive levels to keep competitiveness intact.
Like It or Not, the Economy Will Weaken
Deputy Director of the Institute for Development of Economics and Finance (Indef) Eko Listiyanto said the United States’ 19% tariff on Indonesian products risks lowering economic growth. Based on Indef’s modeling, the tariff’s impact is not positive. “According to the simulation, economic growth will decline,” Eko said.
He attributed this to additional costs from the tariff and weaker U.S. consumer purchasing power. Indonesian products will become more expensive in the market, reducing demand. This directly affects export performance and national economic outcomes.
Eko noted that the recent rise in exports was largely driven by front loading—U.S. businesses securing stock before the tariff took effect. In the medium term, however, export trends will fall as demand softens.
Indef’s study used a 19% tariff scenario. Eko said the results differ from the National Economic Council simulation claiming tariffs could raise growth by 0.5%. “Personally, I find it rather odd to conclude that this tariff can raise growth,” he said.
Labor-intensive sectors are the most vulnerable, Eko added. Footwear and garments are at risk of decline as U.S. demand eases—especially if the U.S. economy worsens.
According to Eko, the IMF projects U.S. growth at 1.8% this year, down from 2.8% last year. With weaker purchasing power, imports will be cut back. At the same time, Indonesia faces pressure from fellow Asian exporters. Malaysia, for instance, has similar export tariffs for palm oil and could capture part of the market. A 1% tariff gap with Vietnam is also unlikely to dislodge Vietnam’s dominance in the U.S. market.
In the short term, the government is advised to focus on fiscal incentives to maintain competitiveness.
In the short term, the government is advised to focus on fiscal incentives to maintain competitiveness.
Cutting production costs, through electricity discounts or tax relief, is seen as more realistic than direct subsidies. “So even if tariffs hit, we can still compress production costs at home,” Eko said.
Eko added that China has used a similar strategy to cope with U.S. tariffs: rather than lowering tariffs, it reduced production burdens for export industries, keeping export prices competitive without violating trade rules.
Mukhlison Sri Widodo, Harits Naufal Arrazie and Ridho Sukra
Caught by a Double-Edged Sword
Micro, small, and medium enterprises (MSMEs)—which contribute more than 60% of Indonesia’s GDP—need to move quickly to anticipate the impact of the United States’ tariff on Indonesia.
MSME products such as handicrafts, processed foods, and textiles will become more expensive in the U.S. market. American consumers could switch to products from countries with lower tariffs.
Accordingly, a slow response will raise the risk of failure, while swift, strategic steps could open the way to broader growth.
Abdul Sobur, Chairman of the Indonesian Furniture and Crafts Industry Association (HIMKI), said that although Indonesia’s import tariff is lower than that of some other countries, the 19% rate is still a heavy burden for MSMEs.
“MSME players are highly sensitive to cost changes, and the government must be concerned with their interests,” he told SUAR. He hopes the government will continue negotiations so the U.S. removes the import tariff on Indonesia.
HIMKI data show Indonesia’s furniture exports (HS 9401–9403) reached US$2.5 billion in 2022, then fell to US$1.9 billion in 2023.
Lana Soelistianingsih, Economist and Deputy Chair of the LPS Board of Commissioners (2023–2025), said the 19% reciprocal import tariff is like a double-edged sword, with both negative and positive effects.
On the positive side, some industrial sectors such as textiles could remain competitive because Indonesia’s applied rate is lower. On the negative side, industry players, especially MSMEs, may think twice about exporting. “The solution is for the government to lobby the U.S. so the import tariff returns to 0 percent,” she said.
