February 27, 2026 | 04:34 pm
TEMPO.CO, Jakarta - A researcher from the Department of Economics at the Centre for Strategic and International Studies (CSIS), Riandy Laksono, has highlighted potential risks behind the implementation of a zero-percent tariff for textile products under the Indonesia-US trade agreement.
Under the Agreement on Reciprocal Trade (ART), the size of the duty-free quota for textile exports is tied to the volume of raw materials sourced from the United States. Riandy cautioned that this requirement could create structural challenges for Indonesia’s textile industry.
He pointed out that the majority of textile raw materials used by Indonesian manufacturers currently come from China.
Imported cotton from the US accounts for only about 8.6 percent of Indonesia’s total cotton imports, compared to 29.4 percent from China.
The disparity is even more pronounced in man-made fibers, where US supplies cover just 0.3 percent, while China accounts for 65.1 percent.
“If the business sector is forced or even strongly encouraged to switch to raw materials from the US, there will be significant disruption in the supply chain,” Riandy said during a media discussion at the CSIS office in Jakarta on Friday, February 27, 2026.
Beyond supply structure, Riandy also emphasized price competitiveness as a major concern. According to him, raw materials sourced from the US are substantially more expensive than those from other suppliers.
For example, cotton fabric imported from the US is priced at around US$19.9 per kilogram, whereas similar products from China cost approximately US$6.25 per kilogram.
He argued that these higher input costs could erode, or even eliminate, the economic benefits gained from the zero-percent tariff facility for Indonesian textile exports.
“The advantage from tariff exemption may not be meaningful if production costs rise significantly,” he suggested.
Previously, Coordinating Minister for Economic Affairs Airlangga Hartarto stated that the US government had agreed to grant tariff exemptions for Indonesian textile exports within certain quota limits.
“The volume will be determined technically, but in the memorandum of understanding signed yesterday, there was already a commitment to purchase cotton that will also support tariff exemptions for exports. The export value has reached around US$4 billion,” Airlangga said.
Overall, the Indonesia-US trade agreement stipulates that Indonesian products exported to the US will generally be subject to a 19 percent tariff. However, 1,819 agricultural and industrial products are eligible for a zero-percent tariff without additional conditions or special provisions.
These products include crude palm oil, coffee, cocoa, spices, rubber, electronic components including semiconductors, and aircraft components.
Read: Indonesia-US Trade Pact Is a 'Zero-Sum Game,' Academic Explains
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