Trump's Tariff Hike Risks Mass Layoffs in Indonesian Textile Sector, Says Economist

President of the United States Donald Trump has announced a 32 percent import tariff on Indonesian products. Achmad Nur Hidayat, an economist and public policy observer at UPN Veteran Jakarta, warned that the policy could result in large-scale layoffs in Indonesia's textile industry.

Achmad described the tariff move as a sign of failed negotiations, predicting long-term damage to the national economy. "The textile and footwear industry, which employs more than 3.6 million workers, will be severely affected," he said in a written statement on Tuesday, July 8, 2025.

He noted that U.S. importers are likely to divert production contracts to countries like Thailand, Vietnam, or Cambodia, where export tariffs are lower.

"This means a threat of increased mass layoffs, which will raise unemployment and reduce people's purchasing power," he added.

The United States currently absorbs over 10 percent of Indonesia's non-oil and gas exports. Achmad said the tariff hike would likely reduce export volumes, suppress foreign exchange earnings, and increase volatility in the rupiah exchange rate.

Concerns over mass layoffs in the sector have been growing since Trump first announced reciprocal tariffs in April 2025.

Indonesian Textile Association (API) Chairman Jemmy Kartiwa Sastraatmaja said the government must respond by ending import relaxations to prevent an influx of finished goods that could further harm the domestic market.

"If Indonesia fails to control the surge of imported goods, layoffs in this textile industry will continue," Jemmy said during a virtual press conference on Friday, April 4, 2025.

On July 7, Donald Trump informed President Prabowo of the tariff rates that would be applied to imported products from Indonesia. In his letter, he stated that beginning August 1, 2025, a 32 percent tariff would be imposed on all Indonesian goods entering the United States, in addition to existing sectoral tariffs.

He also remarked that the 32 percent rate was still relatively modest compared to what he considered necessary to offset the trade deficit between the two countries.