Yarn, fabric, and garment products from China are expected to flood Indonesia because of the trade war. It will lead to an oversupply of domestic textiles, making the price drop and hit Indonesian textile companies.

The US has applied a 25 per cent tariff on textile products from China. Meanwhile, products from Indonesia are subject to a ten per cent to 15 per cent tariff. With these tariff differences, China sees an opportunity to shift its textile products to southeast Asia, including Indonesia. This market is an easy target for China since Indonesia does not apply trade barriers, unlike Brazil or Turkey. Indonesia remains an open market, and the most affected will be companies that rely on the domestic market.

Performance of Indonesian textile industry sector as continued to decline in the last 10 years. On an average, exports rose only three per cent while imports rose 12 per cent. The trade war is an opportunity for Indonesian textiles to takeover the space left vacant by Chin. But competitiveness of its products is still weak. Costs of energy, logistics, and labor are the inhibiting components. However, the textile companies’ credit profile is expected to be stable in the next several months.