JAKARTA: Indonesia is seeking to secure more favourable tariff terms from the United States after Washington imposed a 10 per cent duty on Indonesian imports over alleged forced-labour violations on Friday (July 24), with the country also facing the risk of additional tariffs linked to claims of heavy state subsidies that result in structural overcapacity.
“The government is actively continuing consultations with the US Trade Representative (USTR) to obtain the best and most competitive tariff,” Haryo Limanseto, spokesperson for the Office of Coordinating Economy Minister, told The Jakarta Post on Friday.
“We welcomed the USTR’s recognition that Indonesia has actively committed to preventing and combating forced labour in global supply chains and has a regulatory framework in place to address the issue.”
The new tariff is being brought under Section 301 of the Trade Act of 1974, one of the trade tools US President Donald Trump's administration had wielded after the US Supreme Court in February struck down his sweeping “reciprocal” tariffs imposed last year.
The move came as the temporary 10 per cent global tariff imposed under Section 122 of the Trade Act of 1974 reached its 150-day limit and expired on the same day.
Under Section 301 basis, US imposed a 12.5 per cent tariff on imports from Australia, China, including Hong Kong, Singapore and South Korea, alleging the countries failed to prevent goods made with forced labour from entering the American market.
Meanwhile, Indonesia, alongside Malaysia, Taiwan and India, to face additional tariffs of 10 per cent.
Aside from the forced-labour probe, the Trump administration also pursue another investigation under Section 301, which centered on concerns about excess manufacturing capacity involving Indonesia and 15 other economies.
“Based on information from the US side, the results of the investigation into the excess-capacity issue will be issued soon,” Haryo said.
In June, Jakarta estimates the final tariff burden on Indonesian goods exported to the United States could reach about 18 per cent, that would include an initial 10 per cent tariff tied to forced-labour concerns, followed by an additional component linked to structural overcapacity.
It is now seeking to bring that figure down through negotiations with Washington, while pressing for exclusions for key export products and arguing that Indonesia has taken steps to address US concerns over forced labour.
Indonesia hoped any resulting tariffs will be “favourable and competitive,” while also accommodating product exclusions agreed under the agreement on reciprocal trade (ART), he added.
Jakarta and Washington signed the ART on Feb 19, one day before the US Supreme Court struck down the legal basis for the 19 per cent tariff on Indonesian goods.
The government previously said the bilateral deal could stand on its own, but provisions tied to the now-invalidated tariff authority had created a legal snag, delaying its implementation and ratification.
The US is one of Indonesia’s largest export markets and its largest source of non-oil and gas trade surplus, making it a key export market for products ranging from apparel to palm oil derivatives.
Southeast Asia’s largest economy posted a trade surplus of about US$7 billion with the US in the first five months of 2026, according to Statistics Indonesia (BPS) data.
Export-oriented manufacturers are likely to bear the brunt of the new tariff regime, particularly those heavily dependent on the US market, according to the Indonesian Employers Association (Apindo).
Textiles, garments and footwear are among the most exposed, given their labour-intensive nature and dependence on US buyers.
Other major export categories include electrical machinery and equipment, as well as animal and vegetable fats and oils.
“Prolonged uncertainty would weigh on business decisions, particularly in labor-intensive sectors,” Apindo chairwoman Shinta Kamdani told the Post on Friday.
“For businesses, the uncertainty is not just about the tariff level, but also policy predictability and certainty over implementation.”
Such uncertainty could prompt companies to delay production plans, capacity expansion and new investment until the tariff structure becomes clearer.
The impact would vary across commodities, however, with some products still under discussion for possible exclusion.
“Indonesia should maintain intensive economic diplomacy to secure clarity on the exclusions under negotiation,” she emphasised, adding that investors were also weighing the broader quality of an investment ecosystem, not tariffs alone, when deciding where to relocate production.
Center for Indonesian Policy Studies (CIPS) researcher Hasran said Indonesia would not necessarily benefit from the lower tariff, as several competing exporters, including Bangladesh, India, Malaysia, Cambodia and Pakistan, face the same rate, while Indonesia still contended with higher logistics and trade-facilitation costs.
“Foreign direct investment (FDI) decisions are largely determined by the incremental capital-output ratio (ICOR), port infrastructure, the availability of raw and intermediate materials and whether a free-trade agreement existed,” he said to the Post on Friday.
Rizal Taufikurahman, head of the Center of Macroeconomics and Finance at the Institute for Development of Economics and Finance (Indef), told the Post on Friday the forced-labour issue could affect not only Indonesia’s trade ties with the US but also its standing in global markets.
While the US measure did not mean all Indonesian products were tied to forced-labuor concerns, Rizal suggested that it could raise exporters’ compliance costs and erode their competitiveness as buyers and investors tighten supply-chain audits and demand stricter labour standards and traceability. - The Jakarta Post/ANN
