Indonesia Must Match Malaysia’s Zero-Tariff Palm Oil Deal with US, Analyst Says
Indonesia must strengthen its bargaining position to push the United States into lowering its import tariff on palm oil to zero percent, mirroring the deal Washington recently struck with Malaysia, according to the Center of Economic and Law Studies (Celios).
Celios Executive Director Bhima Yudhistira Adhinegara said Malaysia’s successful negotiation with the US should serve as a model for Indonesia.
“Looking at the palm oil issue, Malaysia can get a zero percent tariff, meaning Indonesia should leverage its bargaining power more effectively,” Bhima said on Friday.
Earlier this week, Malaysian Prime Minister Anwar Ibrahim and US President Donald Trump signed a trade pact that maintained a 19 percent general tariff rate on Malaysian goods but granted zero tariffs for key commodities such as palm oil, cocoa, and rubber, all of which are also Indonesia’s main export products to the US.
According to data from the Central Statistics Agency (BPS), Indonesia exported 1.39 million tons of palm oil to the US in 2024, making it the country’s fourth-largest export destination after India, Pakistan, and China.
However, Bhima said the US market for Indonesian palm oil remains relatively small.
“This means even if tariffs on palm oil are reduced, the benefit to Indonesia will not be significant,” he explained.
He suggested that Indonesia broaden its reciprocal tariff negotiations with the US to include other key exports such as apparel and footwear.
“Indonesia should push for major tariff reductions on garments and footwear since those two commodities account for more than 60 percent of our exports to the US,” Bhima added.
Beyond trade figures, Bhima said Indonesia could position itself as a strategic partner in Southeast Asia, emphasizing its large domestic market for US products, its regional economic influence, and its abundant human resources.
Indonesia remains the world’s largest palm oil exporter, controlling nearly 90 percent of the US market share. Despite Malaysia’s new tariff advantage, the Indonesian Palm Oil Producers Association (Gapki) expressed confidence that the country would not lose ground in the American market.
Gapki chairman Eddy Martono recently told Bisnis Indonesia that Indonesia’s palm oil industry does not face the same level of black campaigns or environmental boycotts in the US as it does in Europe, a factor that helps maintain its competitive edge.
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