Jakarta. Indonesia’s retail sector has welcomed the government’s move to eliminate import tariffs on US goods, viewing it as a catalyst for shopping tourism and retail growth without harming domestic small businesses.

However, industry leaders warn that applying similar tariff exemptions to Chinese goods could severely threaten Indonesia’s small and medium enterprises (SMEs).

Budihardjo Iduansjah, chairman of the Indonesian Shopping Center Tenants Association (Hippindo), said that imports from the United States typically target premium segments, which do not compete directly with locally produced goods.

“Imports from the US don’t disrupt SMEs, except for raw materials, which we’ve always imported anyway,” Budihardjo told reporters in Jakarta on Wednesday. “Branded finished goods like shoes and apparel won’t kill local SMEs. In fact, we want smoother import procedures.”

Budihardjo cited Nike as an example of how premium imports could enhance Indonesia’s shopping ecosystem. “Premium US products could help position Indonesia as the most affordable premium outlet hub in Southeast Asia, attracting shoppers from Singapore and bringing their spending here,” he said.

President Prabowo Subianto and his American counterpart, Donald Trump, recently reached a trade agreement that greatly slashes the US tariffs on Indonesian goods to 19 percent. Trump had pulled back on the 32 percent duty he had previously threatened to impose on Indonesia. In exchange for the tariff cut, Indonesia plans to remove tariffs on nearly all US-origin goods, although tariffs will remain on certain products such as alcoholic beverages and pork.

China: A Different Challenge

While supportive of zero tariffs for US goods, Budihardjo cautioned against extending the same treatment to Chinese imports, warning it would harm domestic producers. “Zero percent tariffs on Chinese imports would directly compete with SMEs here, and that’s a real concern,” he said.

Chinese exports to Indonesia often include low-cost finished goods such as clothing and footwear, placing direct pressure on local manufacturers, unlike US imports that cater to premium market segments.

The United States remains Indonesia’s largest trade surplus contributor, with a surplus of $5.44 billion from January to April 2025, up from $4.37 billion in the same period last year, according to the Central Statistics Agency (BPS). In contrast, Indonesia recorded a $6.28 billion trade deficit with China over the same period.

Indonesia’s textile sector has been hit hard by cheap and second-hand imports from China, with the Indonesian Textile Association (API) reporting that 180,000 workers were laid off between 2022 and 2024 as domestic producers struggled to compete.