Trump Tariffs Risk Hitting National Furniture Industry

The President of the United States (US), Donald Trump, has announced additional import duty tariffs (BMI) scheduled to take effect on April 2, 2025. This policy applies to 15 countries with the largest trade surpluses with the US. Is Indonesia included in the list of those 15 countries?

US Treasury Secretary Scott Bessent and White House Financial Advisor Kevin Hasset said last week that the US is focused on raising tariffs on 15 countries. The 15 targeted countries are countries that enjoy the largest trade surpluses with the US. Bessent called them the “dirty 15”.

Referring to data from the U.S. Census Bureau, Indonesia ranks precisely at 15th place on that list. Jakarta, according to U.S. data, enjoyed a surplus of 19 billion U.S. dollars from trade with Washington, D.C., in 2024.

A surplus for Indonesia and other countries means a deficit for the United States. The U.S. Census Bureau recorded that the U.S. trade balance deficit has consistently exceeded 1 trillion U.S. dollars per year since 2021. Trump considers this a fraud and aims to change the situation. One of the methods is by imposing import tariffs. (Kompas.id, 25/3/2025).

Quoting Reuters, former senior official of the U.S. Department of Commerce who now works at the law firm King & Spalding, Ryan Majerus, stated that regardless of whether sectoral tariffs are imposed on April 2, 2025, or afterward, the U.S. government will remain aggressive in investigating Section 232, as it has done in import investigations on wood and copper.

Still quoting Reuters, President Donald Trump in early March instructed Commerce Secretary Howard Lutnick to investigate American timber imports on the grounds of national security, based on Article 232 of the Trade Expansion Act of 1962.

The White House trade advisor, Peter Navarro, stated that the investigation into timber imports aims to address major exporting countries such as Canada, Germany, and Brazil.

"(These countries) are dumping wood into our markets, harming our economic prosperity and national security," Peter said.

Regarding Trump's policy, the Indonesian Furniture and Craft Industry Association (HIMKI) responded and issued a firm statement.

Indonesia is not directly mentioned as a major exporting country, but it is among the countries exporting wood in the form of furniture and crafts to the US. The investigation could potentially threaten and harm Indonesia's position.

HIMKI Chairman Abdul Sobur expressed his firm stance on the United States' plan. He is concerned that furniture and craft products from Indonesia could be hit by a 25 percent tariff on wood products like what happened in Canada.

"Trump's policy regarding Section 232 shows that the wood and derivative industries that will be subject to a 25 percent tariff will have a major impact, including Indonesia. This policy has the potential to hamper the competitiveness of the national furniture and craft industry in the US market, which has been one of Indonesia's main export destinations," Sobur said when contacted, Friday (3/28/2025).

If that happens, the contribution of the wood and derivative industries to Indonesia's trade is predicted to drop by 15-20 percent. "Income, employment and creativity, to taxes will decrease. Furniture and crafts contribute greatly to exports," he said.

Based on BPS data collected by HIMKI, furniture and craft exports in 2023 reached 2.424 billion US dollars. In 2024, the value increased to 2.598 billion US dollars.

In 2024, the largest contribution will come from wooden furniture worth US$1.009 billion or 52.4 percent. Rattan furniture will contribute US$157 million or 8.20 percent. There will also be metal furniture worth US$66 million.

Of the 10 export destination countries in 2024, the US is the main destination country. Its market share reaches 53.76 percent for furniture exports and 44.13 percent for craft exports.

Sobur continued, if import tariffs apply, the Indonesian government and business actors must look for other potential markets. Expanding the export market to Europe, for example, which is Indonesia's second largest market. Its market share is 30 percent, the second largest after the US.

However, there are increasingly stringent EU regulations on wood-based products, adding to the challenges for domestic industry players. Other countries with potential for market expansion are India, China, East Asian countries, and Middle Eastern countries.

Therefore, Sobur appealed to the government to immediately take strategic steps to protect the industry that absorbs millions of workers. One of them is by conducting high-level lobbying to the US.

"There needs to be a diplomatic approach to the US so that national furniture and craft products can get tariff-free access to their market. In fact, if possible, we need to try to get these products to enter without import duties, as a form of recognition of fair trade cooperation," said Sobur.

Ministry of Industry spokesman Febri Hendri Antoni Arief, when confirmed separately said, manufacturing activities are believed to be increasingly lively if there are pro-industry policies to protect domestic industries. Moreover, the opportunity for domestic market demand is large.

However, the perception pressure due to the dynamics of the tariff war has also begun to be felt by several domestic industries, especially those oriented towards exports to countries experiencing trade wars.

The occurrence of a trade war between world manufacturing producers is a potential and manufacturing challenge that must be watched out for. This is because this dynamic has an impact on the entry of foreign manufacturing products into the country due to being unable to enter their products into the US market due to the impact and consequences of the tariff war.

Nevertheless, the Ministry of Industry and Industry continues to strive to protect domestic industries through the implementation of the Indonesian National Standard (SNI) and Domestic Component Level (TKDN) policies. In addition, to suppress imports, the Ministry of Industry relaxes import regulations and prepares non-tariff measures.

"This policy aims to protect domestic industry from the onslaught of imported products. Protecting domestic industry means protecting 19 million Indonesians who work in domestic industry," said Febri.

Amid global challenges, domestic industry players still report a fairly high level of optimism regarding the business climate in Indonesia.

The optimism of Indonesian industrial players is reflected in the March 2025 Industrial Confidence Index (IKI) report which is still at the expansion level, namely 52.98.

However, this achievement experienced a slowdown of 0.17 points compared to February 2025 or a slowdown of 0.07 points compared to March 2024.

Meanwhile, the expansion of IKI in March 2025 was supported by the growth of 21 sub-sectors with a contribution to the GDP of the non-oil and gas processing industry in the fourth quarter of 2024 of 96.5 percent.

So, out of 23 sub-sectors of the processing industry analyzed, there are two sub-sectors that experienced contraction. The two sub-sectors are the furniture industry (KBLI 31); and the rubber, rubber and plastic goods industry (KBLI 22).

The two sub-sectors with the highest IKI values are the printing and reproduction industry of recorded media (KBLI 18) and the pharmaceutical, chemical drug products and traditional medicine industry (KBLI 21).