Trump’s new tariff offensive puts Indonesia in the firing line
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- USTR released Section 301 findings on June 2, 2026 covering 60 trading partners, placing Indonesia in a group recommended for a 10% tariff over insufficient forced labor enforcement, alongside Canada, Ecuador, the EU, Mexico, and Pakistan, while Vietnam, China, India, and Brazil face 12.5%.
- Indonesia could face an 18% effective tariff burden through a stacking mechanism, with the forced-labor 10% duty hitting after July 24, 2026 and additional manufacturing overcapacity tariffs layered on top from a parallel Section 301 inquiry.
- The US Department of Labor identified forced labor indicators in Indonesia's palm oil sector ($2.06 billion in 2025 exports) and fisheries ($1.17 billion), citing debt bondage, recruitment fees, document confiscation, excessive hours and physical abuse.
- Indonesia's labor-intensive manufacturing exports — knitted garments, footwear, non-knitted apparel and furniture — generated more than $9.1 billion in US sales in 2025 and are the sectors most exposed to factory closures and layoffs if the 18% rate lands.
- The Trump administration pivoted to Section 301 of the US Trade Act of 1974 after the Supreme Court struck down IEEPA-based tariffs on February 20, 2026, launching parallel investigations on March 11-12 that form the legal backbone of the new strategy.
- Coordinating Minister Airlangga Hartarto secured USTR Ambassador Jamieson Greer's agreement on 18 potential product exclusions during OECD Ministerial talks in Paris, covering palm oil, coffee, beef, fruits, vegetables, pharmaceuticals, organic chemicals and rare-earth materials.
- Indonesia's prior trade cushions have eroded: the Generalized System of Preferences lapsed, and the February 27, 2026 Agreement on Reciprocal Trade — which promised zero tariffs on 1,819 lines — now risks being overshadowed by the new Section 301 duties.
Why it matters: Indonesia shipped $31.02 billion to the US in 2025 and now faces duties that could top 18% on top of a rupiah that has weakened past 18,000 per dollar. The July 6 written-comment deadline and July 7 USTR hearings are the last window to carve out exclusions for $9.1 billion in textile and footwear exports before the tariff is locked in after July 24, 2026.
