CSIS Reveals Risks Behind Zero Percent Textile Tariff Conditions

A researcher from the Economics Department at the Centre for Strategic and International Studies (CSIS), Riandy Laksono, has revealed risks underlying the imposition of zero-percent tariffs on textile products in the Indonesia-United States trade agreement. Under the Agreement on Reciprocal Trade (ART), the quota for duty-free textile products is determined based on the extent of raw material sourcing from the United States.

However, Riandy noted that the majority of textile raw materials used by Indonesia originate from China. He explained that cotton imported from the United States accounts for only approximately 8.6 percent, whilst China accounts for 29.4 percent.

Furthermore, man-made fibres from the United States comprise only 0.3 percent, with China accounting for 65.1 percent. “If the business community is forced or pressured to use raw materials from America, there will be considerable disruption to the supply chain,” said Riandy during a media discussion at CSIS offices in Jakarta on Friday, 27 February 2026.

Additionally, Riandy noted that raw material prices from the United States are considerably higher than from other suppliers. He cited the example of cotton fabric from the United States priced at US$19.9 per kilogram, whilst Chinese fabric costs only US$6.25 per kilogram. Riandy contended that the high price of American raw materials could potentially negate the benefits gained from the zero-percent tariff exemption for textile products.

Previously, the Coordinating Minister for Economic Affairs, Airlangga Hartarto, stated that the United States had agreed to eliminate tariffs for exports of textile products from Indonesia, subject to certain quota restrictions. “The volume will be determined technically, but in the previous Memorandum of Understanding there was already a cotton purchase agreement which will also provide export tariff exemptions, and exports have been approximately US$4 billion to date,” said Airlangga Hartarto.

Overall, the trade agreement between Indonesia and the United States has established that Indonesian products exported to America will be subject to a 19 percent tariff. However, 1,819 agricultural and industrial products receive zero-percent tariffs without exemptions or special conditions, including crude palm oil, coffee, cocoa, spices, rubber, electronic components including semiconductors, and aircraft components.