Indonesia's textile makers struggle amid US tariffs

The textile industry is set to be among the hardest hit by the recent United States tariff hikes, with 40 percent of Indonesian textiles and apparel exports bound for the US market.

Industry players warn that the 32 percent so-called "reciprocal" tariff to be imposed on Indonesian goods once the 90-day suspension granted for bilateral negotiations ends could "accelerate layoffs" in a sector already struggling before the policy surfaced.

Efforts to diversify Indonesian exports beyond the US are deemed infeasible in the short term because of either limited market demand or intense competition from local players in target countries.

Indonesia, which recorded a $16.8 billion trade surplus with the US last year, has landed on a long list of countries facing steep tariff hikes. On April 2, US President Donald Trump announced a 32 percent tariff on Indonesian goods.

However, Trump reversed course temporarily lowering duties for all affected countries to a "baseline" rate of 10 percent for 90 days.

Redma Gita Wirawasta, chairman of the Indonesian Fiber and Filament Yarn Producers Association, or APSyFI, said around 40 percent of the wider industry's exports went to the US, mostly in the form of finished goods. Indonesia is currently the fifth-largest textile and apparel exporter to the US behind China, India, Vietnam and Bangladesh.

He warned that the new US tariffs could erode Indonesia's price competitiveness in the US market. At the same time, other countries might also start redirecting their supply to Indonesia.

"That would disrupt the domestic industry and accelerate layoffs across the board," Redma said during a news conference on April 4.

Even before Trump's tariff announcement, Indonesia's textile, apparel and footwear sectors were under pressure.

One of the most striking cases is textile giant PT Sri Rejeki Isman, which declared bankruptcy in October last year and officially ceased operations on March 1, leaving more than 10,000 workers unemployed.

On March 5, the Banten Manpower and Transmigration Agency reported that two major footwear manufacturers, PT Adis Dimension Footwear and PT Victory Chingluh Indonesia, which produce for global brands like Nike, Adidas, Reebok and Mizuno, had either laid off or were in the process of laying off thousands of workers.

Some other exporters, including the Indonesian Association of Metal Work and Machiner said the 90-day delay in enforcing the reciprocal tariffs could trigger a surge in demand from US importers eager to capitalize on the temporary reprieve.

However, APSyFI's Redma cautioned against ramping up exports during this window, as a sudden spike could further widen the US trade deficit with Indonesia, the excuse US has given for tariff policy.

The Indonesian government has pledged to negotiate with the US. Finance Minister Sri Mulyani Indrawati also emphasized the importance of diversifying export destinations to reduce Indonesia's heavy reliance on the US market.

Jemmy Kartiwa Sastraatmaja, chairman of Indonesian Textile Association, said: "What we need to do now is negotiate smartly with the US, while also smartly protecting our domestic market."

The Jakarta Post, Indonesia