JAKARTA — Indonesia has entered a new phase of its trade relationship with the United States after Washington imposed an additional 10% tariff under Section 301 of the Trade Act of 1974.

The measure took effect on July 24, 2026, and forms part of a broader action covering 60 trading partners. The United States says the tariffs are intended to pressure foreign governments to prohibit and effectively enforce bans on imports made with forced labor.

Indonesia is one of 17 economies receiving the lower 10% rate. China and most of the other investigated economies face a 12.5% duty, while the European Union, Japan, South Korea, Taiwan and Switzerland are subject to formulas that take existing most-favored-nation tariffs into account.

Why Indonesia Received the Lower Rate

The US Trade Representative divided the affected economies according to their forced-labor import policies.

A 10% rate applies when a country already operates a prohibition, has introduced a partial system, or has committed through an Agreement on Reciprocal Trade to adopt and enforce an import ban.

The 12.5% rate is directed at economies that Washington says have not taken those steps.

USTR said its investigation involved more than 2,100 public comments, two rounds of hearings and direct engagement with trading partners. The 60 economies covered by the action account for approximately 99.4% of US imports.

Indonesia has adopted a formal domestic framework. Trade Minister Regulation No. 9 of 2026 governs imports of goods produced through forced-labor business activities and has been in force since April.

Indonesian officials interpret the lower tariff as recognition that the country has made an active commitment to preventing forced labor in global supply chains.

The 10% Figure Is Not Necessarily the Final Customs Bill

The Section 301 tariff is an additional duty rather than a universal all-in rate.

The amount ultimately paid on a shipment may depend on the normal MFN tariff, product classification, country-of-origin rules, separate sectoral measures and any available exemptions.

USTR excluded informational materials, donations, accompanied baggage and goods already covered by Section 232 duties. It also exempted selected raw materials, products that could cause economy-wide disruption, goods unavailable in sufficient quantities in the United States and items whose exclusion may encourage stronger forced-labor enforcement.

An Indonesian exporter therefore cannot determine the effective tariff by adding 10% to every shipment without reviewing the relevant customs code and exemption annex.

Product Exemptions Are Now the Central Negotiating Issue

Indonesia’s Coordinating Ministry for Economic Affairs said several Indonesian products had been placed on USTR’s product-exemption list.

The government has not treated that development as the end of the negotiations. It is seeking confirmation that benefits previously granted through the US–Indonesia Agreement on Reciprocal Trade will remain available under the new Section 301 structure.

The ART finalised in February 2026 generally maintained a 19% US reciprocal tariff on Indonesian-origin goods while allowing identified products to receive a zero reciprocal rate.

It also created a mechanism through which a specified volume of Indonesian textiles and apparel could qualify for a zero reciprocal tariff. The future volume is linked to Indonesia’s use of US cotton and man-made-fibre textile inputs.

Those ART benefits and the new Section 301 duty arise from different legal instruments. Businesses still require detailed customs guidance on whether and how the various exemptions interact.

Indonesian officials have said they want products already protected by the ART to retain those advantages, but the full treatment has not yet been publicly resolved.

A Separate Excess-Capacity Decision Is Still Pending

The forced-labor action is only one part of Washington’s Section 301 review.

USTR is separately examining alleged policies and practices that create or sustain structural excess manufacturing capacity. Indonesia is waiting for that investigation’s outcome, which US officials are expected to release in the near term.

Jakarta hopes the decision will produce favourable treatment and take account of commitments made in the bilateral ART.

Indonesia has participated through written submissions, public hearings and government-to-government consultations. The government has argued that it possesses data showing that the structural overcapacity and forced-labor practices identified in the broader investigation are not present in Indonesia.

A negative excess-capacity finding could create another layer of uncertainty for manufacturers. A favourable decision would strengthen Indonesia’s relative position against competing exporters.

How the Tariff Could Affect Indonesian Companies

The effect will vary considerably by industry and company.

Exporters with strong pricing power may pass part of the tariff to American buyers. Companies operating in highly competitive sectors may have to absorb it through lower margins. Others may renegotiate contracts, alter production inputs or redirect goods to different markets.

Labor-intensive goods are particularly exposed because small price differences can influence sourcing decisions. Companies relying on imported raw materials may face pressure from both production costs and the new duty.

Indonesia does retain one relative advantage: many competing economies face the higher 12.5% rate. The commercial effect may be less damaging when rival products become more expensive by an equal or greater amount.

The most favourable outcome would combine the lower country rate with product-specific exemptions.

Jakarta’s Two-Part Response

Indonesia is pursuing domestic cost reductions and external market diversification.

At home, the government plans to simplify raw-material import regulations. The objective is to reduce input and administrative costs so manufacturers can remain competitive despite higher US border charges.

Abroad, Indonesia intends to make greater use of existing trade agreements, including IA-CEPA with Australia, IK-CEPA with South Korea and the Regional Comprehensive Economic Partnership.

It is also seeking to expand access through the Indonesia–Eurasian Economic Union FTA, the Indonesia–European Union CEPA and the Indonesia–Canada CEPA. These agreements are intended to provide alternative destinations for exporters that would otherwise rely heavily on the US market.

Diversification cannot immediately replace American demand, particularly for companies with established customers and product certifications in the United States. It can, however, reduce long-term exposure to a single country’s policy changes.

Washington’s Justification Faces International Resistance

The tariffs have been disputed by governments across Europe, Asia and the Pacific.

Several countries reject the suggestion that they have failed to address forced labor. Critics argue that the human-rights rationale is being used to restore a broad tariff structure after earlier emergency-based duties were struck down by the US Supreme Court.

The European Union offered a guarded response because selected European products were exempted in a way that broadly preserved parts of an earlier US–EU agreement. China strongly opposed the measure, while Australia, New Zealand, Japan and South Korea questioned both its justification and fairness.

The Section 301 duties replaced a temporary global 10% tariff as that measure expired. The administration is using a long-established trade statute in an effort to place its new policy on a stronger legal foundation.

The Final Impact Depends on Details Still Missing

Indonesia’s inclusion in the 10% group is a better outcome than the 12.5% treatment imposed on China and dozens of other economies.

It is not yet possible to calculate the full national impact from that headline rate.

The key variables are the final list of exempted products, the interaction with ART commitments, the separate excess-capacity finding and the ability of exporters to reduce costs or shift markets.

For now, Indonesia has gained recognition for its forced-labor regulatory commitments while still facing a meaningful new trade barrier. Whether that position becomes commercially favourable will depend on the next round of technical negotiations with USTR.

Disclaimer: This article is provided solely for informational and educational purposes. It does not constitute legal, customs, investment or business advice.