Desperate Measures Amidst Tariff Chaos

In a bold move to counteract the staggering 32% tariffs imposed by the United States, Indonesia's palm oil sector is calling for urgent government intervention. Industry groups and farmers alike are urging a reduction in export costs to mitigate the financial strain caused by these tariffs.

Impact on Farmers: A Call for Change

The smallholders' group SPKS has highlighted the dire consequences of these tariffs, warning that farmers could see a chilling 3% drop in their earnings for palm fresh fruit bunches. Chairman Sabarudin stated, "President Trump's tariffs are set to distort demand for our crude palm oil (CPO) and other palm oil products." The group is adamant that eliminating export taxes and levies could stabilize prices and provide much-needed relief.

Current Export Tax Burden

Currently, Indonesia imposes a hefty $196 per metric ton tax and levy on crude palm oil exports. While the government has proposed adjusting these rates to lessen the impact of US tariffs by about 5%, the SPKS is pushing for a more drastic cut to zero.

GAPKI's Cautious Approach

Meanwhile, the largest palm oil organization, GAPKI, remains cautious. Chairman Eddy Martono indicated his group is monitoring the situation closely to understand how any adjustments might affect costs. He pointed out that domestic obligations currently inflate costs by $221 per ton for Indonesian exporters, in stark contrast to the $140 per ton faced by Malaysian competitors.

Strategies for Competitiveness

In response to the tariffs, GAPKI is advocating for a targeted $100 reduction in costs specifically for shipments to the U.S., which ranks as Indonesia's fourth largest market for palm oil, comprising around 7% of total export volume and revenue in 2023. Martono emphasized, "We are not seeking concessions for all markets, just for maintaining our competitiveness against Malaysia in the U.S. market. If we still can't compete, we will engage with the government further."

The Future of Indonesia's Palm Oil Export Market

This urgent call to action underscores the critical need for Indonesia's palm oil industry to adapt and thrive amidst evolving global trade dynamics. As the situation unfolds, the government's next steps will be crucial in shaping the future of this vital sector.