Rubber Industry Impacted by US Import Tariffs, Indonesia Must Immediately Find New Markets

The imposition of a reciprocal tariff of 32 percent by the United States has had a highly significant impact on Indonesia's rubber industry. As one of the primary export destinations, the tariff threatens to reduce export volumes and depress rubber prices. Indonesia must urgently seek new markets to save the national rubber industry.

"The rubber commodity was greatly affected by Trump's tariff policy. A day after Trump's announcement, the rubber commodity market immediately panicked, resulting in a price drop," said Edy Irwansyah, Executive Secretary of the Indonesian Rubber Companies Association (Gakindo) North Sumatra, Friday (4/4/2025).

On the Singapore Exchange (SGX), according to Edy, the price of Technical Specified Rubber (TSR 20) for the May contract stood at 185.6 US cents per kilogram, down by 7.5 cents or 3.88 percent in a single day. The significant price decline has continued into Friday afternoon.

Edy stated that the US is the main destination country for Indonesia's rubber exports. In 2024, North Sumatra's rubber exports to the US accounted for 20.11 percent, ranking second after Japan, which reached 29.66 percent. The contribution of other export destination countries was significantly smaller, namely India at 6.62 percent, China at 6.60 percent, and Brazil at 5.03 percent.

The implementation of U.S. import tariffs has caused the price of Indonesian rubber to become more expensive in the U.S. market compared to products from rubber-producing countries with lower reciprocal tariffs. "With the tariff increase, importers from the U.S. will seek alternative suppliers and reduce the purchase volume from Indonesia," said Edy.

The fluctuating tariff policy also creates uncertainty for Indonesia's rubber industry, making it difficult to devise long-term business strategies. This makes business actors more vulnerable to losses and declining revenues.

Edy stated that the decline in global market prices would affect farmers. This is unfortunate, as farmers have just begun to recover after rubber prices started to rise again over the past year.

With the increase in tariffs, importers from the US will look for alternative suppliers and reduce their purchasing volume from Indonesia.

Edy said Indonesia must immediately seek markets outside the US to compensate for the decline in exports to the US. India and China are the most potential markets. Rubber consumption in both countries continues to increase with the growth of the automotive industry.

Another potential country is Brazil, which can be worked on through intergovernmental trade cooperation. "As a major export destination, increasing exports to Japan is also still very potential," said Edy.

In addition to expanding the market, the national rubber industry must also strengthen its competitiveness. Competition in the world rubber market will be even higher because other largest rubber producing countries are also affected, namely Thailand and Vietnam. Both countries will also look for new markets.

Increasing the competitiveness of rubber needs to be done by maintaining product quality according to international standards, production efficiency to remain competitive, and increasing sustainability aspects to make it more attractive to the global market.

Edy said the government needs to help with export incentives and work on trade agreements with other countries. On the other hand, business actors also need to strengthen exports to potential countries.

The government also needs to anticipate the impact of the implementation of US tariffs down to the farmer level. Gapkindo noted that of the 3.8 million hectares of rubber plantations in Indonesia, around 89 percent are owned by farmers. As many as 2.1 million farmers depend on their family's economy on rubber plantations.

Sungkunen Tarigan, Head of the Mbuah Page Farmers Group in Sinembah Tanjung Muda Hilir District, Deli Serdang Regency, said that farmers have been enthusiastic in the past year after the price of rubber rose to IDR 14,500 per kilogram.

"Rubber prices are currently starting to drop to Rp13,500 per kilogram. We hope the price drop does not continue," Sungkunen said.

Sungkunen said that farmers have started tapping their long-neglected rubber plantations again after the rubber price hike. The farmer group can now collect 30 tons of rubber every two weeks, doubling the previous 15 tons. If the price drops again, farmers will abandon their rubber plantations.

On Thursday (3/4/2025) evening, Secretary of the Coordinating Ministry for Economic Affairs Susiwijono Moegiarso said that the imposition of reciprocal tariffs would have a significant impact on the competitiveness of Indonesian export products in the US market. So far, Indonesia's main export products in the US market include electronics, textiles and textile products, footwear, palm oil, rubber, furniture, shrimp, and marine fishery products.

"We will soon calculate the impact of the US reciprocal tariffs on these commodities. We will also take strategic steps to mitigate the negative impact on Indonesia's national economy," he said, (Kompas.id, 3/4/2025).

At the ASEAN level, Indonesia's reciprocal tariff is still lower than that of several ASEAN member countries. Cambodia is subject to the highest reciprocal tariff at 49 percent, followed by Vietnam at 46 percent and Thailand at 36 percent. However, Indonesia's reciprocal tariff is still higher compared to Malaysia (24 percent), Singapore (10 percent), and the Philippines (17 percent).

According to Susiwijono, since early 2025, the Indonesian government has prepared various strategies and steps to deal with the implementation of new US tariffs. The Indonesian government has also negotiated with the US government.

As part of the negotiations, the Indonesian government has prepared various steps to address the issues raised by the US. These issues are outlined in the annual report of the National Trade Estimate (NTE) 2025 published by the Office of the US Trade Representative (USTR).