Staying competitive: Managing the impact of U.S. tariffs on Indonesian exports

In the wake of a shifting global trade environment, rising U.S. tariffs are a significant concern for Indonesian exporters. Recent trade policy shifts, including a proposed 32% reciprocal tariff1 on certain Indonesian exports, put direct pressure on profit margins. For businesses in Indonesia, ignoring these added taxes on shipping is not an option, as they directly affect competitiveness, pricing, and customer demand.

This guide will take a closer look at the evolving tariff landscape in the U.S.. We'll explore how tariffs affect Indonesia's businesses and consumers and outline proactive strategies that business owners can implement to mitigate the impact of these changes.

Understanding the impact of U.S. tariffs on Indonesian exports

At its core, an import tariff is a tax that increases the cost of bringing goods into a country. When the U.S. imposes tariffs on Indonesian products, the "landed cost"—the total price of getting a product to the U.S. border—goes up. While some of this cost might be absorbed by the supply chain, a significant portion is often passed on to the end consumer, resulting in higher retail prices.

Compounding this issue was the end of the de minimis exemption for shipments from Indonesia to the U.S.. Previously, goods valued under US$800 could enter the country duty-free. Now, these low-value shipments are also subject to import tariffs². While diplomatic efforts have seen the initial reciprocal tariff rate lowered to 19% as of August 2025³, the combined effect of these changes means that almost all U.S.-bound exports from Indonesia now face higher costs, an impact that will be felt for some time.

The impact of U.S. import tariffs goes beyond just consumer prices, affecting various industries in Indonesia in different ways:

• Garments and textiles: As a key export sector for Indonesia, this industry is highly price-sensitive. Even a small increase in cost due to tariffs can make Indonesian apparel less competitive in the U.S. market, potentially leading to a significant drop in demand as U.S. buyers look for alternatives.
• Furniture: Indonesian furniture is popular for its craftsmanship and materials. However, import tariffs can raise the final price of these bulky items substantially, impacting both consumer affordability and the profit margins of Indonesian manufacturers.
• Electronics and components: As Indonesia strengthens its role in the global electronics supply chain, tariffs on finished goods or essential components could disrupt this growth. It may raise production costs for U.S. companies that rely on Indonesian parts, making the entire supply chain less efficient.
• Footwear: Similar to the garment industry, footwear is another major export category where price competition is fierce. The impact of tariffs on Indonesia's footwear exports can lead U.S. retailers to source from countries with more favorable trade terms.

Strategic measures for Indonesian exporters

1. Adopt forward-looking trade strategies

The unpredictable nature of U.S. tariffs means that a reactive approach is no longer sustainable for Indonesian exporters. Waiting for new duties to be announced before acting can lead to sudden price shocks, lost orders, and eroded profit margins. 

To stay competitive, businesses must shift from reacting to challenges to anticipating them. Adopting a forward-looking trade strategy is the first and most critical step in this process. This means regularly reviewing your product lines to identify which goods are most vulnerable to new import tariffs. 

A proactive approach allows you to develop strategies before your profit margins are impacted, rather than simply reacting after new duties are imposed.

Scenario planning and risk assessment are key components of this strategy. For example, what would happen if the existing 32% tariff on textiles increased to 50%, or if similar tariffs were suddenly expanded to a new product category? Having contingency plans for these specific "what-if" scenarios is essential for resilience and agile decision-making.

2. Diversify trading partners

To mitigate the impact of tariffs in Indonesia, businesses should aim to reduce their reliance on the U.S. market. Exploring and developing alternative export markets in regions like Europe, the Middle East, and other parts of Asia can create a more balanced export portfolio. Diversification helps to spread risk so that your business is not overly affected by geopolitical circumstances.

3. Examine country of origin & rules of origin

"Rules of Origin" are the criteria used to determine the national source of a product. Your product’s declared Country of Origin (COO) is what customs authorities use to determine which tariffs and duty rates apply, making this a critical detail in your export documentation.

For instance, a piece of furniture assembled in Indonesia using wood imported from another country might have its origin questioned if the transformation process in Indonesia isn't substantial enough.

Therefore, it is important to reassess your sourcing and assembly processes to ensure your COO declarations are accurate and compliant. Incorrectly declaring origin, even unintentionally, can lead to your products facing unexpected duties and penalties upon arrival in the U.S..

4. Realign supply chains & production

Building on market diversification and COO analysis, it's wise to review your entire supply chain. Consider if proximity manufacturing or "nearshoring" some assembly processes to a country with a more favorable trade agreement with the U.S. could reduce your tariff impact.

Geopolitical considerations are now a key part of supply chain planning. For example, an Indonesian electronics exporter might choose to establish a small, final assembly plant in Mexico. This could allow their products to qualify for USMCA benefits, ensuring more stable and predictable access to the North American market.

5. Revisit and renegotiate contracts

While the immediate impact of tariffs on Indonesia may seem negative, this period of disruption is an opportunity to revisit and strengthen your existing business contracts. A proactive review can help you clarify responsibilities and mitigate future financial risks.

Here are key agreements to review in the wake of the U.S. reciprocal tariffs:

• Supply agreement / Purchase agreement: Review clauses related to price adjustments and changes in law. Your goal is to determine if you can legally pass on some or all of the new tariff costs to your buyer. If the contract is silent on this, it's a critical point for renegotiation to avoid absorbing the full financial impact yourself.
• Distribution agreement: The new tariffs will increase the landed cost for your U.S. distributor, which affects the final retail price and their sales volume. Proactively discuss renegotiating pricing structures, minimum purchase obligations, and even marketing support to help your distributor keep your products competitive in the U.S. market.
• Master service agreement (MSA): Examine clauses governing "Compliance with Laws" and "Change Management". An MSA is the ideal place to formally add a process for how your partnership will handle unforeseen government-imposed costs like new tariffs, ensuring all future orders under the agreement are covered.
• Strategic partnership agreement (SPA): Tariffs can fundamentally alter the financial viability of a joint venture or co-development project. It's essential to re-evaluate the financial models, cost-sharing arrangements, and profit projections within the SPA to ensure the partnership remains mutually beneficial and financially sound.
• Incoterms clauses: If your contracts use DDP (Delivered Duty Paid), you, the Indonesian exporter, are now responsible for paying these new U.S. tariffs. Consider renegotiating with your buyers to shift to terms like DAP (Delivered at Place), where the buyer assumes responsibility for all import duties and taxes on shipping.

6. Conduct due diligence on counterparties

It is a good time to assess the financial and operational health of your key partners, especially those heavily reliant on the U.S. market. Understanding your partners' exposure to tariffs helps you mitigate downstream risks, preventing disruptions in your own supply chain if they are negatively affected by geopolitical circumstances.

A practical guide for conducting this due diligence includes:

1. Map supply chain dependencies: Identify which of your suppliers and distributors have significant exposure to the U.S. market and the specific tariffs impacting them.
2. Review financial health: Assess the financial stability of your key stakeholders. Are they equipped to absorb the increased costs, or are they at risk of default?
3. Conduct scenario testing: Work with partners to model the impact of further tariff escalations. Understand their contingency plans and how they might affect your business.
4. Draft contractual safeguards: Update future agreements with clauses that protect your business from a partner’s failure due to tariff-related pressures.

This detailed review should inform your sourcing and trans-shipment practices. A thorough understanding of your partners’ risks enables you to make informed decisions and avoid unexpected duties that may arise in the supply chain.

7. Work with trade and customs experts

Navigating the complexities of U.S. import tariffs requires specialized knowledge. Engaging legal counsel, trade consultants, and expert logistics providers like DHL Express helps your business stay ahead of compliance challenges and make informed strategic decisions.

DHL Express offers deep expertise in several critical areas to help Indonesian businesses navigate this complex environment. Its in-house customs specialists can help ensure compliance with the latest U.S. tariff regulations and documentation requirements. Furthermore, DHL Express provides tools like My Global Trade Services (MyGTS) to help businesses calculate estimated landed costs for better financial planning. When you are ready to start shipping, DHL Express is here to help.

Navigate U.S. tariffs and stay competitive

U.S. tariffs are a persistent challenge for exporters in Indonesia. However, proactive strategies like market diversification, supply chain analysis, and contractual reviews are essential for mitigating risks and staying competitive on the global stage.

DHL Express helps Indonesian exporters navigate these challenges. We provide:

• Expert guidance on customs and U.S. import tariffs.
• Fast, reliable international delivery to keep your supply chain moving.
• Global expertise to manage complex trade environments effectively.

Ready to start shipping with a smarter strategy for your U.S. exports? Open a DHL Express business account to explore how our solutions can help your business.