JAKARTA – The Indonesia Palm Oil Producers have asked the government to reduce the export tariffs imposed on palm oil exports as a way to mitigate the impacts of President Donald Trump’s policy of high reciprocal tariff and maintain the competitiveness of Indonesian palm oil products at the USA market.
The Indonesian Palm Oil Association (GAPKI) Chairman Eddy Martono said that due to the application of the new USA tariff, Malaysia, which is the world’s second largest producer and exporter of palm oil after Indonesia, is potential to increase its exports, while reducing Indonesian market share in the USA. It is because Malaysia’s palm oil exports are only slapped with export tariff of 24%, lower than the tariff imposed on Indonesia at 34%.
“In addition to that, Indonesia’s palm oil exports are burdened with three obligations, namely domestic market obligation (DMO), export levy (PE) and export tax (BK). Such burdens amount to a financial cost of around US$221 per metric ton, while Malaysia, based on their policy, is only at US$140 per metric ton,” Eddy Martono told Kontan on Tuesday (08/04/2025).
Eddy said that currently Indonesia’s market share of palm oil at the USA market has reached 89 percent. “During the last five years our palm oil exports to USA have significantly increased. We reported the rising trend during our meeting yesterday with economic coordinating minister, trade minister, deputy foreign minister, deputy minister of industry, and deputy minister of finance. Before 2020, our palm exports to the USA were only below one million tons.
Then, the exports increased to 1.5 million tons in 2020, and to 2.5 million tons in 2023. But in 2024 the exports declined to 2.2 million tons. But there is a potential increase there,” Eddy said after having a meeting with a government team led by Economic Coordinating Minister Airlangga Hartarto at the office building of the economic coordinating ministry in Jakarta on Monday (07/04/2025).
He said that they had proposed to the government to reduce the export tariffs imposed on the Indonesia’s palm oil exports destined to USA. “It will be a special case for the USA market to keep our competitiveness through government policies. Minister Airlangga responded that it is possible to do so. It will be considered,” he said.
Eddy noted that GAPKI attended the meeting as part of socialization and getting inputs from business players regarding the reciprocal tariff of 32 percent imposed by the USA against Indonesian products imported to the country. “Considering that the high reciprocal tariff will negatively impact our palm oil exports, we hope that the Indonesian government will reduce the export tariffs imposed on palm oil,” he said.
Eddy said that Indonesian palm oil players hope the government will secure the market share of Indonesia in the USA. Otherwise it will be taken over by Malaysia and other countries of Latin America.
“Actually, Malaysia is facing the issue of child labour. But we shouldn’t underestimate it, as Malaysia is only charged with import tariff of 24%, lower than Indonesia,” he said.
Eddy said that by considering the response from the government and its plan to deal with the high tariff, he is optimistic that the government will be able to solve the problem and maintain the competitiveness of Indonesian products at the USA market.
Economic Coordinating Minister Airlangga Hartarto said that President Prabowo Subianto had also instructed structural improvements and deregulations, especially on non-tariff measures (NTMs). “We’re also intensively coordinating with the USA, through a cross-ministerial and institutional team , meeting with the United States Trade Representative (USTR), and the USA Chamber of Commerce,” he said.
Minister Airlangga had also met with Malaysian Prime Minister to discuss about the regional economic interest and strengthening ASEAN cooperation. “But rather than taking retaliatory actions, we’ll pursue efforts of diplomacy and negotiations. We also revitalize the Trade and Investment Framework Agreement (TIFA) by adding the issue of financial sector,” he said. (*)
