Cotton, LNG Could Be Considerations in Negotiations with Trump

JAKARTA, KOMPAS – Textile and ceramic industry players hope that the Government of Indonesia can intensify diplomacy and negotiations with the United States Government in response to Trump's tariffs. One of the offers that could be made is the import of U.S. products such as cotton and liquefied natural gas.

This proposal was conveyed separately by the Chairman of the Indonesian Fiber and Filament Yarn Producers Association, Redma Gita Wirawasta, and the Chairman of the Indonesian Ceramic Association (Asaki), Edy Suyanto, on Friday (4/4/2025). Both responded to the import duty tariff policy of 32 percent that will be implemented by the United States (US) government on Indonesian export products starting April 9, 2025.

Regarding this issue, Gita hopes that the Indonesian government will pursue diplomacy and negotiations with the U.S. government. One of the measures suggested is to increase cotton imports from the U.S. to at least 20 percent of the total cotton imports to date. This step is expected to contribute to balancing the 32 percent tariff.

Indonesia in 2023 imported cotton worth 1.56 billion US dollars. This places Indonesia as the 5th largest cotton importer in the world.

Referring to The Observatory of Economic Complexity (OEC), a website on global trade data, Indonesia in 2023 imported cotton worth 1.56 billion US dollars. This places Indonesia as the 5th largest cotton importer in the world.

In the same year, cotton was the 25th most imported product in Indonesia. Indonesia imported cotton primarily from China (453 million USD), Australia (298 million USD), the United States (195 million USD), Brazil (193 million USD), and Vietnam (111 million USD).

"Our textile industry still requires and imports a significant amount of cotton. If we can use more U.S. cotton, there could be a reduction in garment import tariffs to Indonesia," said Gita.

Gita believes that close relations between Indonesian and US industries coupled with diplomatic efforts will provide mutual benefits for both countries. "Because we both need each other and there must be a balance so that our industries are maintained. In the last two years, our cotton imports have decreased because the textile industry is not healthy," he said.

Indonesia, Gita added, has been competing with China, Vietnam, India in the textile industry. China, which gave the US a deficit of 292 billion US dollars, was imposed a tariff of 34 percent. Vietnam, which caused the US deficit to reach 124 billion US dollars, was imposed a tariff of 46 percent.

India is only charged a 26 percent tariff. In fact, the US has a deficit of 46 billion US dollars in its trade with India. Meanwhile, Indonesia, which contributes to the US trade deficit of 46 billion US dollars, is charged a 32 percent tariff.

“(Our industry) is in fourth position. Well, if they have bigger tariff barriers, it means we have the opportunity to replace their market share. But the main competitor is the US manufacturing industry itself. If you look at this reciprocity, Trump wants to balance trade which was initially in deficit,” Gita told Kompas.

If we look at the imposition of import tariffs, Gita thinks that Indonesia will compete with India. While Vietnam and China will experience more severe obstacles and challenges. In this case, Indonesia can take the opportunity to compete with India and especially the US.

Separately, Edy Suyanto said, the 32 percent tariff policy by the US to Indonesia will certainly have a big impact on various industrial sectors, including the ceramic industry. Therefore, the Indonesian government must immediately start negotiations with the US which is considered to have unilaterally applied the amount of import tariffs and is not in accordance with WTO rules.

This negotiation and diplomacy is an effort to save the domestic industry, especially the ceramic industry. Indonesia is among the top four ceramic exporting countries to the US.

Based on Asaki data, Indonesia exports ceramics to the US with a capacity of 251.2 thousand cubic meters with a value of 5,004.9 thousand US dollars throughout 2023. In 2024, ceramic exports will drop to a capacity of 172.5 thousand cubic meters with a value of 3,008 US dollars.

Ceramic exports fell 33.9 percent in value and 31.4 percent in volume. Following the imposition of a 32 percent tariff by the US, there are concerns that ceramic exports will decline in 2025.

"To present a more balanced trade balance to the United States, Indonesia can start discussing the possibility of importing liquefied natural gas from the United States where currently the national ceramic industry is experiencing disruptions in gas supply and the high price of gas regasification of 16.77 US dollars per MMBTU. This is the time for Indonesia to open the gas import tap," said Eddy.

The important thing that needs to be seriously considered by the government regarding the gas regasification price of 16.77 US dollars per metric British thermal unit (MMBTU) is the weakening of the rupiah after Trump's tariff announcement. Industry players must pay the price of gas using US dollars, which will add to the burden.

"So far, the ceramic industry has been hit by a ladder because in addition to being charged an extremely expensive price of 16.77 US dollars per MMBTU, it also has to pay gas costs in US dollars," he said.

Eddy does not mind if in negotiations with the US, the import duty on ceramics from the US, which is currently 5 percent, is zeroed as long as there are no fraudulent practices such as dumping. He is sure that national ceramic products are no less competitive than ceramic products made in the US.

To mitigate other risks, Eddy warned of the potential for a flood of ceramic products from India, which has been the largest ceramic exporter to the US, after Chinese ceramics were subject to anti-dumping tariffs of 200 to 400 percent by the US.

"Asaki will also immediately prepare an anti-dumping application for ceramics from India, which has increased significantly from year to year by hundreds of percent," explained Eddy.

Asaki is also currently observing the volume of ceramic imports from China after the PMK BMAD (Minister of Finance Regulation on Anti-Dumping Import Duty) since October 2024. He is concerned that the scheme will be less effective because the BMAD amount for the majority of imported ceramic product types is only around 25 percent to 30 percent.

At a time when all countries are implementing protectionist practices, Asaki also expects the government to consistently promote the Domestic Product Utilization Increase (P3DN) program through domestic component level (TKDN) certification.

This policy has proven effective in helping the absorption of domestic products or creating demand for the national ceramics industry.

Asaki also encouraged the Prabowo Government to immediately implement the 3 million houses program which will provide many multiplier effects for the building materials industry. For example, ceramic tiles, sanitary ware, ceramic roof tiles, and ceramic tableware.

Member of Commission VI of the Indonesian House of Representatives, Rachmat Gobel in his written statement invited all parties, especially the government, to protect and save Indonesia from the impact of Trump's policies.

"Trump's move will have a big impact on Indonesia. There is only one sentence, let's guard and save Indonesia from the danger before our eyes," he said, Thursday, (3/4/2025).

According to Gobel, before the trade war, the Indonesian economy was experiencing deindustrialization with the closure of several factories and layoffs. "There is a possibility that this will continue to deepen," he said.

The impact, he continued, is that unemployment could increase. On the other hand, there is a tendency for the rupiah to continue to weaken against a number of foreign currencies.

Gobel suggested that the government provide ease and deregulation of permits for those who want to invest in Indonesia. Second, provide tax and tariff incentives for the business world.

Third, guard Indonesia's entry points from smuggled goods. Fourth, permanently ban the import of textiles and textile products with traditional Indonesian fabric motifs such as batik, woven fabrics, and embroidery.

Fifth, permanently ban the import of used clothing. Sixth, the government helps find new export markets. Seventh, the government must negotiate with the United States government to lower tariffs. Eighth, protect and guard the domestic market from the onslaught of imported products.

According to Gobel, Trump's tariff policy will make all countries compete to provide incentives for their exporters to find new markets.

"Goods from China and Vietnam could flood into Indonesia. This is what must be prevented. We must protect the domestic market from the onslaught of imports, one of which is through enforcing TKDN regulations," he said.