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Reading: Trump’s Tariff Policy Threatens Key Indonesian Exports 10 Vulnerable Sectors at Risk
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informabank.com > Blog > Around The World > Trump’s Tariff Policy Threatens Key Indonesian Exports 10 Vulnerable Sectors at Risk
Around The WorldEconomic Trends

Trump’s Tariff Policy Threatens Key Indonesian Exports 10 Vulnerable Sectors at Risk

6 Min Read 570k Views

The potential revival of aggressive U.S. tariff policies under former President Donald Trump could deal a severe blow to Indonesia’s export-driven economy, with analysts warning that 10 major product categories—ranging from electrical machinery to processed seafood—face heightened risks of trade disruptions. As Trump campaigns on a platform of “reciprocal tariffs” and stricter trade enforcement, Indonesian industries reliant on the U.S. market are bracing for higher costs, reduced competitiveness, and possible retaliatory measures. Below are the exports most likely to bear the brunt of the policy shift:

  1. Electrical Machinery and Equipment (HS Code 85)

Accounting for over $3.2 billion in annual exports to the U.S., electrical machinery—including wiring, circuit boards, and generators—is Indonesia’s top export to America. Trump’s proposed 15–20% tariffs on imported electronics would directly raise costs for U.S. manufacturers reliant on Indonesian components, potentially triggering order cancellations. Companies like PT Schneider Electric and PT Panasonic Manufacturing Indonesia, which supply global supply chains, fear losing market share to competitors in Vietnam or Mexico.

  1. Knitted Apparel and Accessories (HS Code 61)

Indonesia’s $1.8 billion knitted garment industry, a critical employer in Central Java and West Java, faces existential risks. U.S. brands like Gap and Nike source millions of T-shirts, sweaters, and hosiery items from Indonesian factories. Tariffs of 10–25% could force buyers to shift orders to cheaper FTA partners like Bangladesh or Cambodia, jeopardizing 500,000 textile jobs.

  1. Footwear (HS Code 64)

Indonesia exported $1.5 billion worth of footwear to the U.S. in 2023, but its 5% share of the American market pales next to Vietnam’s dominance. Trump’s tariffs, combined with stricter rules of origin under the U.S.-Vietnam trade deal, could erase Indonesia’s cost advantage. Major producers like PT Panarub Industry (supplier to Adidas) warn that price hikes would render Indonesian shoes uncompetitive.

  1. Non-Knitted Apparel (HS Code 62)

Formal wear, denim, and other non-knitted garments generate $1.2 billion in annual U.S. exports. With U.S. retailers already negotiating lower prices amid weak consumer demand, tariffs could accelerate the shift to automated factories in Ethiopia or Turkey. “Our profit margins are razor-thin,” said a Surabaya-based factory owner. “Even a 5% tariff would wipe us out.”

  1. Animal/Vegetable Fats and Oils (HS Code 15)

Palm oil derivatives, used in everything from biofuels to snacks, contribute $900 million to Indonesia’s U.S. exports. Though direct tariffs on palm oil are unlikely (due to U.S. food industry lobbying), Trump’s broader “reciprocal” trade rules could restrict Indonesian biodiesel and oleochemicals. The EU’s recent deforestation regulations already complicate access to Western markets, leaving exporters like Musim Mas vulnerable.

  1. Rubber and Rubber Products (HS Code 40)

Indonesia, the world’s second-largest natural rubber producer, ships $750 million worth of tires, gloves, and industrial rubber to the U.S. annually. Tariffs would compound existing challenges like falling global rubber prices and competition from synthetic alternatives. Top firms like PT Gajah Tunggal, a major tire supplier to Walmart, may cut production if demand falters.

  1. Furniture and Lighting (HS Code 94)

U.S. buyers imported $600 million in Indonesian furniture last year, drawn by teakwood and rattan craftsmanship. However, tariffs of 10–15% could push retailers like IKEA and West Elm to source from tariff-exempt FTA partners like Malaysia. Small workshops in Jepara, Central Java—a furniture hub employing 200,000 workers—are most at risk.

  1. Fish and Shrimp (HS Code 03)

Indonesia’s $550 million seafood exports to the U.S., including frozen shrimp and tuna, face a double threat: tariffs and stricter FDA inspections. Trump’s 2018 seafood tariffs hit Indonesian producers hard, and a repeat could benefit rivals like India or Ecuador. “We’re still recovering from COVID-era logistics chaos,” said a Bali-based exporter. “This would be a knockout punch.”

  1. Mechanical Machinery (HS Code 84)

Industrial machinery and parts, worth $500 million annually, underpin Indonesia’s ambitions to move up the manufacturing value chain. However, U.S. tariffs on pumps, engines, and construction equipment would stall growth for firms like PT Komatsu Indonesia, which relies on American mining and agriculture sectors.

  1. Processed Meat and Fish (HS Code 16)

Canned tuna, sardines, and ready-to-eat meals generate $300 million in U.S. sales, but tariffs could cripple this niche sector. Starkist and Chicken of the Sea, which package Indonesian-caught tuna for American shelves, may relocate processing to Thailand or the Philippines to avoid levies.

Broader Implications and Industry Response

The Indonesian government has urged Washington to exempt strategic partners from tariffs, citing the two nations’ $40 billion bilateral trade relationship. However, with Trump prioritizing domestic manufacturing, concessions appear unlikely. Trade Minister Zulkifli Hasan warned of retaliatory measures, including restrictions on U.S. agricultural imports, but analysts caution that Indonesia lacks leverage compared to larger economies like China.

“We’re collateral damage in a U.S.-China trade war,” said Lili Yan Ing, an economist at the ASEAN Secretariat. “Diversification to ASEAN and Middle Eastern markets is essential, but it won’t happen overnight.”

For now, exporters are slashing prices, hedging currency risks, and pleading for government subsidies. Yet with Trump leading polls ahead of November’s election, Indonesia must prepare for a turbulent new era of protectionism—one that threatens to unravel decades of economic progress.

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