The recent trade agreement between Indonesia and the United States, headlined by a zero-percent tariff facility for Indonesian textile and garment products, has sparked a complex debate within the Southeast Asian manufacturing hub. While the deal promises unprecedented access to the lucrative American market, experts warn that the road to a full industrial recovery remains fraught with structural hurdles that a simple tariff cut may not solve.
CSIS Warns of Supply Chain Disruptions Hidden Behind Indonesia-US Zero Percent Textile Tariff Scheme
The Centre for Strategic and International Studies (CSIS) has highlighted potential risks underlying the implementation of a zero percent tariff for textile products within the Indonesia–United States trade agreement. Riandy Laksono, a researcher from the CSIS Economics Department, warns that while the policy appears beneficial, it could trigger significant disruptions in the national textile industry's supply chain. Under the Reciprocal Trade Agreement (RTA) scheme, the tariff-free quota for Indonesian textile products is determined by the volume of raw materials sourced from the United States. Essentially, the larger the portion of U.S. raw materials used in production, the greater the opportunity for Indonesian manufacturers to access the zero percent tariff facility.
The Sri Lankan textile and apparel (T&A) sector has entered a critical phase of structural realignment as of early 2026. After years of heavy reliance on external suppliers, the island nation successfully recorded a strategic easing in fabric import expenditures to $2.1 billion in 2025. This shift is far more than a budgetary adjustment; it represents a sophisticated maneuver to bolster domestic value addition and accelerate "speed-to-market" capabilities in an increasingly volatile global trade environment. While China remains the primary supplier, accounting for approximately 45 percent of total import volume, the marginal decline in external sourcing highlights Sri Lanka’s ambition to achieve self-reliance through vertical integration.
The Textile Branch of the Islamic Students Alumni Association (KAHMI Textile) is officially demanding full transparency regarding the Memorandum of Understanding (MOU) between Pan Brothers and Raven within the framework of the Agreement on Reciprocal Trade (ART). This demand, voiced by Executive Director Agus Riyanto, aims to ensure that the materials to be imported are strictly shredded rags and not secondhand finished clothing. Agus emphasized that the distinction is clearly defined in the Indonesian Customs Tariff Book, where worn clothing falls under HS 6309, while shredded materials or rags are classified under HS 6310. He argued that transparency is essential to prevent the domestic market from being flooded with used clothes under the guise of industrial raw materials, which would ultimately devastate small-scale local industries just so specific companies can secure a 0% export tariff.
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