Inviting Trump to Negotiation, RI Will Import More Raw Materials from the US

JAKARTA, KOMPAS - The Indonesian government will increase the volume of raw material imports from the United States as a negotiation tool. Through this measure, the White House is expected to reduce the reciprocal import tariff of 32 percent imposed on Indonesia.

In addition to increasing the import of raw materials from the US, the policy on the domestic component level or TKDN will also be reviewed for several commodities imported from the US. However, the relaxation measures are still being further studied.

This was revealed after the government held a meeting with business associations regarding the implementation of new U.S. trade tariffs on partner countries, in Jakarta, Monday (7/4/2025).

Coordinating Minister for Economic Affairs Airlangga Hartarto stated that the main reason the US increased import tariffs on Indonesia is due to the US trade deficit with Indonesia reaching 18 billion US dollars in 2024.

He confirmed that several U.S. commodities, whose import volumes will be increased, are industrial raw materials that also contribute to the growth of domestic industries. These include commodities such as wheat, cotton, as well as oil and gas (energy).

"The offer to increase the import volume will be included in the proposal that Indonesia will prepare for the U.S. as part of the negotiations," said Airlangga after the meeting.

Until now, Airlangga continued, the government will still review and further calculate the target for reducing import tariffs imposed by the U.S. on goods from Indonesia. However, the government is certain to aim for the import tariff rates to eventually not disadvantage Indonesia.

Deputy Minister of Industry Faisol Riza said that private industry players and state-owned enterprises (BUMN) have mitigated so that the increase in the volume of raw material imports from the US can be optimally absorbed and processed domestically.

"This is homework for our industry, but I think it has been discussed by the association. The policy of the negotiation is also expected to help the industry to meet its raw materials at a lower cost," said Riza.

In addition to increasing the volume of raw material imports from the US, the government will also review the TKDN policy for commodities exported by the US. However, Riza said that the TKDN relaxation was still being studied further so he could not yet explain in detail the intended relaxation steps.

Riza confirmed that in the near future Indonesia will immediately communicate with the US regarding the TKDN relaxation, including the amount of relaxation that will be agreed upon.

"We have prepared several proposals. Whether the US government will accept them or not will depend on the results of the discussion. The negotiations will also discuss the basis for the calculation," he said.

The Indonesian government's decision to choose the negotiation path in responding to Trump's tariff policy is a joint agreement of the leaders of Southeast Asian countries.

Next week, Airlangga and Indonesian Foreign Minister Sugiono will depart for Washington DC to submit a negotiation proposal to the US government.

So far, the US government claims that more than 50 countries have started negotiations with the US since the announcement of the latest import tariffs was made on April 2, 2025.

Indonesia is subject to an import tariff of 32 percent which will take effect on April 9, 2025. This tariff is lower than Cambodia which was given a new tariff of 49 percent, followed by Laos at 48 percent, Vietnam at 46 percent, Myanmar at 44 percent, and Thailand at 36 percent.

Indonesia's tariff is higher than Malaysia and Brunei Darussalam at 24 percent, the Philippines at 17 percent, and Singapore which has the lowest tariff in the region at 10 percent.

Chairman of the Indonesian Textile Association (API) Jemmy Kartiwa Sastraatmaja said that increasing cotton imports could be one of Indonesia's efforts to deal with new US tariffs. According to him, there is still room for imports to increase the ratio of US cotton imports for raw materials for the textile industry from 17 percent to 50 percent.

"So far, Indonesia has imported cotton from other countries such as Australia, Brazil and China. If cotton imports from the US are increased, the hope is that the US can also lower Indonesia's export tariffs to the country," said Jemmy.

Contacted separately, the General Chairperson of the Indonesian Filament Fiber and Yarn Producers Association, Redma Gita Wirawasta, said that the domestic textile and textile product (TPT) industry still really needs large amounts of cotton raw materials.

Moreover, quality products from Indonesia are in demand by many countries, including the US market.

According to Gita, exports to the US can still be done with low tariffs if Indonesia uses at least 20 percent of cotton raw materials from the US. This can be an opportunity and a negotiating tool because the US cannot provide yarn and fabric.

Therefore, Indonesia should use more US cotton which can be combined with polyester and rayon fibers spun and woven domestically.

This step will improve the performance of national TPT as a whole from upstream to downstream, while simultaneously reducing the rate of imports of finished goods.

In January 2025, the value of cotton imports from the US was US$6.82 million with a volume of 3.46 million kilograms. Meanwhile, throughout 2024, the value of cotton imports from the US reached US$151 million with a volume of 70.3 million kg. This figure is down compared to cotton imports from the US in 2023, which was US$195 million with a volume of 84.8 million kg.

Meanwhile, total cotton imports from several countries throughout 2023 reached 1.5 billion US dollars with a volume of 467 million kg. This figure decreased slightly in 2024 with an import value of 1.49 billion US dollars with a volume of 508 million kg.

"There is still room for us to import cotton from the US. At least we can import 20 percent cotton. This is an important part of the US import tariff (negotiation) by using more cotton from the US," Gita said.

Head of the Fiscal Policy Agency of the Ministry of Finance, Febrio Kacaribu, said that one of the government's current focuses is reducing the US trade deficit with Indonesia by increasing imports.

He ensured that the move to increase imports of raw materials from the US had been anticipated by the government and industry players so that it would not backfire on the Indonesian economy.

"So, fellow entrepreneurs also have a way to navigate. When industry players do that navigation, they also consult with the government," said Febrio.

Contacted separately, Executive Director of NEXT Indonesia Center, Christiantoko, assessed that diplomacy and negotiation were the right decisions that Indonesia could take in responding to the US import tariff policy.

This is because Trump's tariff policy could pose a significant risk to Indonesia because it would hit labor-intensive industries.

Based on a study by the NEXT Indonesia Center, the US's absorption capacity for non-knitted clothing and accessories from Indonesia reached 10.7 billion US dollars throughout 2020-2024.

That is equivalent to 50.5 percent of Indonesia's total exports to the world. Likewise with furniture, furnishings, and furnishings. The US absorbs up to 58.2 percent of Indonesia's total exports or around 7.5 billion US dollars.

"So, if shipments to the US are hampered by tariffs, exports of these commodities could be disrupted, or even collapse. This is because more than half of these products are absorbed by the American market," Christiantoko said.