Indonesia to Remain Top Palm Oil Supplier for US Thanks to Tariff Deal

Indonesia is set to maintain its dominance in the American palm oil market after the US agreed to slash its reciprocal tariff on Jakarta from 32 percent to 19 percent, much lower than its competitor, Malaysia.

Malaysia, meanwhile, is facing a tariff of 25 percent based on US President Donald Trump’s letter issued last week. Additionally, the US government has already imposed a 10 percent baseline tariff on both palm oil-producing countries, just like the rest of the world.

Agriculture Minister Andi Amran Sulaiman said Thursday that the tariff rate gap could give Jakarta an edge on Malaysia in palm oil trade with the US.

“Our only competitor in crude palm oil [CPO] is Malaysia, isn’t it? And this is a golden opportunity for our agriculture sector,” Andi told reporters in Jakarta.

The Indonesian Palm Oil Association (Gapki) data showed that the country had exported 2.2 million tons of palm oil to the United States last year, reaching around $2.9 billion in value. Indonesia accounts for around 85 percent of US palm oil imports.

Fadhil Hasan, the international affairs head at Gapki, recently warned that the US might turn to Malaysian palm oil if Jakarta failed to secure a lower tariff. The higher the tariff, the more expensive overseas goods will become for American consumers.

News agency Bernama reported that the US had bought 191,000 tons of Malaysian palm oil last year. This was equivalent to about 10 percent of US palm oil imports.

Malaysian Trade Minister Tengku Zafrul Aziz said that his country was still negotiating with Trump’s government following Indonesia’s deal. According to Zafrul, Kuala Lumpur is aiming for a “win-win” outcome.

“We still have time. Most importantly, we must ensure that this is a negotiation beneficial to both countries,” Zafrul said in Kuala Lumpur on Wednesday, as quoted by local news outlet The Star.

Malaysia’s 25 percent tariff rate is also up by a percentage point from the initial 24 percent levy announced in April.

Tags: Malaysia, palm oil, tariff, Indonesia, US