Indonesian Textile Industry Welcomes US Reciprocal Tariff, Eyes EU Partnership
Indonesia’s textile sector is anticipating a boost from a newly implemented 19% reciprocal tariff imposed by the United States, with industry leaders expressing optimism that the rate – lower than those faced by many Asian competitors – will positively impact performance.
The tariff structure is seen as a significant opportunity for Indonesian manufacturers, particularly those supplying global brands. A director at PT Pan Brothers Tbk (PBRX), a major textile and apparel issuer, stated on Sunday, July 27, 2025, that the impact is “very positive for Pan Brothers, for labor-intensive and apparel industries, compared to competitor countries that also produce apparel.” The director emphasized the benefit to the entire apparel production sector.
Pan Brothers: A Global Supply Chain Hub
Pan Brothers primarily serves the global market, supplying well-known brands like Adidas, The North Face, Uniqlo, Lululemon, Kathmandu, Arc’teryx, Amer Group, and Lacoste. While the company does serve the Indonesian domestic market, orders originate from global demand, positioning Pan Brothers as a multinational supplier. In 2024, the company’s exports were distributed as follows: 60% to the Asia Pacific region, 15% to Europe, and 25% to the United States.
Opportunities in Europe with CEPA
Beyond the US tariff, Indonesian businesses are looking ahead to the potential of the Indonesia-European Union Comprehensive Economic Partnership Agreement (CEPA). According to the Pan Brothers director, securing a 0% tariff with the EU, anticipated around early 2027, would be “very advantageous” for labor-intensive industries. The potential market share within the European Union is considered substantial.
Limited Impact on Small Businesses
The 19% US tariff is not expected to significantly disrupt small and medium-sized enterprises (SMEs) in Indonesia. The Chairperson of the Indonesian Retailers and Tenants Association (Hippindo) believes that imported US products occupy a different market segment than locally produced goods, avoiding direct competition. “If it’s clothing and shoes, it definitely won’t harm. In fact, we ask that it be facilitated,” the chairperson said on Wednesday, July 23, 2025, following a press conference.
The Hippindo chairperson further noted a preference for favorable trade terms with China, stating, “If it’s 0 percent for China, oh no, let’s not go there.” The organization anticipates that increased access to affordable American products could even boost shopping tourism, potentially attracting consumers from neighboring countries like Singapore.
The influx of imported retail products is viewed as a positive force, stimulating trade and driving growth in the shopping tourism sector. “A breath of fresh air for retailers,” the Hippindo chairperson concluded, suggesting that premium outlets in Indonesia may soon offer the most affordable American products.
Amira Nada Fauziyyah contributed to the writing of this article.
