Jakarta. The single percentage point difference between the US tariff that Indonesia gets compared to Vietnam has kept Jakarta’s businesses on their toes.

Vietnam was the first ASEAN country to secure a deal with US President Donald Trump, followed by Indonesia. Hanoi got Trump to slash his punitive tariffs from 46 percent to 20 percent. Indonesia also got a much lower tariff, a drop from 32 percent to 19 percent. However, the slight difference does not mean that Indonesia can rest on its laurels, according to the country’s business associations. 

“The devil is in the details. We have to look at the details [of the agreement],” Shinta Kamdani, the chairwoman at the Indonesian Employers’ Association (Apindo), said in Jakarta on Monday evening.

“Vietnam is the one that we are most worried about. There is only a slight difference in our tariffs. … Well, we have to thank the government since it’s a major drop from the original 32 percent,” Shinta told the press.

Vietnam is among the US’s top suppliers for apparel and footwear, both of which Indonesia also exports, albeit in smaller volumes. 

Government data showed that Vietnam’s US-bound footwear exports totaled $9.1 billion, compared to Indonesia’s $2.6 billion. Vietnam’s knitted or crocheted apparel exports reached $8.5 billion, surpassing Indonesia’s $2.3 billion. There was also a $4.7 billion gap in Indonesia’s non-knitted apparel exports to the US when compared to Vietnam, with Hanoi in the lead. 

However, Shinta said that the difference in transhipment clauses could give Jakarta an edge on Hanoi. 

Both ASEAN countries have transhipment clauses in their deals as Trump ramps up his crackdown on transhipped Chinese goods. In Vietnam’s case, Trump said he would impose 40 percent tariffs on transhipped goods. Trump did not specify the transshipment tariffs on Indonesia, only saying that he would add the tariff from a higher-tariffed country onto the Indonesian goods. Transshipment means moving goods between vehicles via a third country, a practice that Trump fears can pave the way for tariff evasion.

Kadin’s chief, Anindya Bakrie, said that Vietnam was a country that Indonesia should keep tabs on.

“We should use this opportunity to deregulate and cut costs. Vietnam is our main competitor, and its tariff is only one percentage point higher. This means that we must make sure that our costs of logistics, energy, and labor become even more competitive,” Anindya said.

Logistic costs in Indonesia are about 14 percent of the country’s gross domestic product (GDP) as of 2023. The archipelagic country aims to slash it to 8 percent by 2030. Indonesia is doing better than Vietnam in this aspect, as the latter’s logistic costs represent 18 percent of its GDP.

Indonesia is currently drafting a joint statement with the US as a follow-up to the preliminary agreement. This joint statement will include the technical specifics and when the 19 percent tariff will officially kick in. Indonesia is currently subject to a 10 percent baseline tariff when exporting to the US. Senior minister Airlangga Hartarto had gathered Indonesian businesses, including Kadin and Apindo, in his office to brief them on the latest tariff updates that day.

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