US Tariff Hike Threatens Indonesia’s Palm Oil Exports, Gapki Urges Market Diversification
Key Takeaways
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JAKARTA, Investortrust.id – Indonesia’s palm oil exports are under pressure after the United States imposed a steep 32% import tariff set to take effect on Friday, Aug 1, 2025. The move is expected to significantly weaken the competitiveness of Indonesian palm oil in the US market, where the country currently holds an 89% share.
Eddy Martono, Chairman of the Indonesian Palm Oil Association (GAPKI), warned that the tariff hike could lead to a decline in export volumes to the US, although the exact impact is still being assessed.
“If the tariff remains at 32%, there is a strong likelihood that our palm oil exports to the US will decline. The extent is still being calculated,” Eddy told Investortrust.id on Thursday, July 10.
According to GAPKI data, Indonesia’s palm oil shipments to the US reached a record 2.5 million tons in 2023 but dropped to 2.2 million tons in 2024. With the new tariff in place, Eddy predicted that US buyers may pivot to other suppliers such as Malaysia or Latin American countries, which face lower duties.
To mitigate the impact, GAPKI is pushing for greater export diversification by expanding into non-traditional markets such as Africa, the Middle East, Central Asia, and Russia. These efforts will complement efforts to maintain exports to existing key markets like China, India, Pakistan, and the European Union.
“We can’t afford to lose our main markets. GAPKI needs full support from the government because this diversification must be a joint effort,” Eddy emphasized.
Negotiation Deadlock and Geopolitical Underpinnings
The Centre for Strategic and International Studies (CSIS) suggested that Indonesia’s reciprocal tariff negotiations with the US may have stalled due to Jakarta’s limited concessions during trade talks, in contrast to more comprehensive offers from Vietnam.
“The Vietnamese package could help reduce the US trade deficit by up to $30 billion annually,” said Dandy Rafitrandi, a researcher at CSIS’s Economic Department, during a briefing in Jakarta.
Indonesia, in contrast, only presented a one-time trade proposal. “There’s a stark difference in magnitude and positioning,” Dandy said.
He also noted that US President Donald Trump may be leveraging the tariff decision for domestic political gain, signaling to voters that tariffs can effectively reduce America’s trade deficit.
Indonesia’s government expressed surprise over the decision, stating that it had fulfilled all US requests and submitted what it considered a solid proposal.
Despite the setback, the Coordinating Ministry for Economic Affairs plans to resume talks, hoping to reduce or reverse the tariff. Spokesperson Haryo Limanseto said negotiations would continue even after the new rate takes effect.
“We expect the talks won’t conclude immediately after August,” Haryo said, noting that a follow-up meeting was being arranged within the next few days. The meeting would occur before Coordinating Minister Airlangga Hartarto departs for Brussels with President Prabowo Subianto over the weekend.