US Tariff Reduction Encourages Indonesia's Labor Intensive Industry

US and Rupiah dollars (Photo: dock. Antara)

JAKARTA - Spokesperson for the Coordinating Ministry for Economic Affairs Haryo Limanseto said that after undergoing an intensive and comprehensive negotiation process, the tariff for importing Indonesian products to the United States (US) market was successfully reduced to 19 percent and much better than the previous initial figure of 32 percent.

He added that this was decided in a high-level agreement from President of the Republic of Indonesia Prabowo Subianto's direct communication with US President Donald Trump.

"The significant reduction in the resipprocal rate is a concrete step that will open wider market access for Indonesian export products and continue to strengthen Indonesia's position in the midst of the current global trade competition," he said in his statement, quoted Monday, July 21.

Haryo conveyed that the tariff agreement imposed on Indonesia was also the lowest compared to a number of other countries in the region, as well as recording Indonesia as the first country to reach an agreement after the announcement of US President Donald Trump's official statement on July 7, 2025.

He explained that the government's own negotiation process had been carried out since April 2025 through the visit of the Coordinating Minister for Economic Affairs Airlangga Hartarto and the negotiating team to the US to meet a number of representatives of the US Government.

According to him, the success of the negotiation effort over the US import rate which received appreciation from various parties was considered a strategic achievement in strengthening the competitiveness of the national labor-intensive sector, especially the garment and footwear industry.

Harya said that with this latest lower tariff agreement, the opportunity for the national labor-intensive sector to get additional markets to the US will be more competitive than other countries.

He added that the Government also assessed that the agreement to reduce tariffs provides certainty for the business world and has the opportunity to have a positive impact on job creation, support industrial relocation to Indonesia, and will ultimately increase investment.

Furthermore, he said that the United States is one of the main countries for Indonesia's export destinations and is in second position after China.

"The solid sector of national works such as footwear product garment is one of the industries that has a large scale in the US market, for that protection through government intervention is carried out to prevent a large number of market declines and layoffs (PHK)," he explained.

According to him, this agreement is considered to be able to benefit Indonesia by obtaining lower rates for leading export commodities such as palm oil.

He added that the Government also believes that the latest trade agreement with the US is balanced and strategic.

According to him, a number of products that are the mainstay of the US to be exported to Indonesia so far include energy products, agricultural products, machinery and equipment, to air vehicles.

Until now, he said that the Indonesian Government itself continues to show its commitment to strengthening the competitiveness of the domestic industry through various strategic steps, including industrial deregulation to encourage investment and utilization of global supply chains.

In addition, he said that President Prabowo Subianto also paid great attention to the importance of strengthening the supply chain as part of the transformation of the national economy.

"In this context, the application of relatively lower import rates by the US will also be an additional support that strengthens Indonesia's position in the global market," he said.

In addition, he said that the Government also consistently continues to expand access to other markets for domestic products through various ongoing negotiations and international cooperation.

"The combination between lowering export rates to the US and other international cooperation is expected to have a double positive impact on expanding the export market and strengthening the competitiveness of the national industry at the global level, so that in the end it can support national economic growth," he concluded.