Indonesia’s textile and apparel sector is bracing for severe fallout following the U.S. government’s imposition of a 32% “reciprocal” tariff on Indonesian goods—a move that industry players fear could exacerbate job losses and erode the sector’s competitiveness in one of its key export markets.
With around 40% of Indonesia’s textile exports destined for the United States, the steep tariff hike—announced by President Donald Trump on April 2—threatens to further destabilize a sector already reeling from declining global demand and competition from cheap imports. While the U.S. has temporarily reduced the tariff to 10% for a 90-day negotiation window, uncertainty looms large.
Redma Gita Wirawasta, chairman of the Indonesian Filament Yarn Producers Association (APSyFI), emphasized that Indonesia’s position as the fifth-largest textile exporter to the U.S. is now under threat. “This tariff hike could disrupt the entire value chain, trigger a flood of cheap imports domestically, and accelerate layoffs,” he warned.
As part of its strategy to mitigate the impact, the Indonesian textile industry is lobbying the government to increase cotton imports from the U.S. The move, stakeholders say, could serve as a strategic trade concession to balance the trade relationship and potentially reduce U.S. pressure.
Cotton as a Bargaining Chip
Once a major buyer of U.S. cotton, Indonesia saw its cotton imports from the U.S. drop from $300 million to $140 million in recent years. Industry leaders believe that reinstating U.S. cotton imports could be used as leverage in bilateral negotiations. Jemmy Kartiwa Sastraatmaja, chairman of the Indonesian Textile Association (API), noted that aligning cotton purchases with the U.S. harvest season would limit cost implications while helping reduce trade imbalances.
The associations also urged the government to tighten import controls and enforce local content requirements (TKDN) to protect domestic production from being overwhelmed by diverted exports from other nations facing even higher U.S. tariffs.
Unfeasibility of Export Diversification
Despite government calls for diversification, stakeholders argue that alternative markets lack either the demand or offer little room to compete due to protectionist measures. “Markets like China, Vietnam, and India are not realistic alternatives. They are textile giants themselves with strong barriers,” said API’s Ian Syarif.
The domestic market, they say, must now play a more central role, alongside smart diplomacy with Washington. “What we need to do is negotiate wisely while protecting our domestic base,” said API’s Jemmy.
Mounting Layoffs and Factory Closures
The industry’s fragility was already evident before the tariffs. PT Sri Rejeki Isman (Sritex), once a textile giant, declared bankruptcy in 2023, ceasing operations by March 2024 and laying off over 10,000 workers. In the footwear segment, companies like PT Adis Dimension Footwear and PT Victory Chingluh Indonesia, suppliers to Nike, Adidas, and Reebok, have also begun mass layoffs.
The threat of losing the U.S. market, however, could deepen these job losses across the sector unless effective trade diplomacy and import substitution strategies are adopted quickly.
Short-Term Export Surge or Long-Term Risk?
Some exporters hope the temporary tariff reprieve might spark a short-term export boost. But Redma cautioned against exploiting the window too aggressively, noting that a sudden spike could widen the trade imbalance—exacerbating the very issue that triggered U.S. action.
Looking Ahead
As Indonesia faces growing pressure to recalibrate its textile strategy, stakeholders insist on a dual-track approach: re-engage U.S. trade officials with viable incentives like cotton imports and restructure domestic protection mechanisms to insulate against global market shocks.
With $16.8 billion in surplus trade with the U.S. last year, Indonesia’s textile industry remains deeply entangled in the American economy. Whether this trade relationship can be preserved or reimagined will depend largely on swift, calculated policy moves in the weeks ahead.
