In their report on the Indonesian stock market, Anantha Lakshmi and Diana Mariska alluded to how Indonesia is now feeling the effects of Donald Trump’s tariff wars, with the collapse of the textile company Sritex (“Indonesian stocks tumble on concerns over weakening consumer spending”, Report, March 19).
Sritex, which was one of south-east Asia’s largest textile manufacturers, closed its operations in March, due to financial difficulties exacerbated by the trade war.
The case underscores the vulnerability of Indonesia’s textile sector to external shocks and competitive pressures. The US imposition of tariffs on Chinese textiles and apparel has led to a surplus of Chinese textile products. With reduced access to the US market, China has redirected its exports to other countries, including Indonesia. This influx of cheaper Chinese textiles has increased competition for Indonesian textile manufacturers, making it harder for them to compete both domestically and internationally.
The increased supply of Chinese textiles in the global market has led to downward pressure on prices. Indonesian textile exporters have had to lower their prices to remain competitive, which has squeezed profit margins and affected the overall viability of the Indonesian industry.
Similar pressures are facing Indonesian rubber exporters, with US-imposed tariffs on a wide range of rubber products from China leading to increased costs and reduced competitiveness for rubber products. This has resulted in a decline in demand for Indonesian rubber exports as global manufacturers seek to minimise their costs.
To mitigate this, Indonesia should, first, seek to diversify its export markets to reduce reliance on the US and China. Second, it must improve the quality and competitiveness of its export commodities. Third, it should develop and support domestic industries to help them to reduce their dependence on imports.
Finally, Jakarta needs to improve its trade infrastructure, such as ports, logistics and transportation networks — this way, facilitating smoother trade flows and reducing costs for exporters.
By implementing these strategies, Indonesia can better navigate the challenges posed by the current tariff wars — and in the process strengthen its economic resilience to face future uncertainties.
Darmo Wicaksono
Senior Economist, Bank Indonesia
Illinia Ayudhia Riyadi
Economist, International Department, Bank Indonesia, Jakarta, Indonesia
