Recently, Indonesia has been making frequent moves on the international trade stage. It has successively reached a political agreement with the European Union on the Comprehensive Economic Partnership Agreement (CEPA) and finalized a new tariff arrangement with the United States. These series of measures not only affect the regional economic pattern but also bring new opportunities and challenges to Indonesia's development. Among them, China's textile industry has also been affected by the impact that cannot be ignored.
Indonesia reached the CEPA political agreement with the European Union, laying a solid foundation for economic cooperation
European Commission President Ursula von der Leyen and Indonesian President Prabowo Subianto met in Brussels and reached a political agreement on the Comprehensive Economic Partnership Agreement (CEPA). This significant milestone paves the way for Commissioner Maros Sevkovic and Coordinating Minister Ellanga Hatato to formally conclude an agreement by September 2025. The EU delegation to Indonesia and Brunei Darussalam stated in a press release that this move highlights the common commitment of both sides to deepen bilateral economic relations and strengthen trade cooperation.
Von der Leyen said, "Europe and Indonesia are choosing a path of openness, cooperation and common prosperity." This agreement will open up new markets and create more opportunities for our enterprise. It will also help strengthen the supply chain of key raw materials, which is crucial for Europe's clean technology and steel industries. Prabowo believes: "This is an important moment." For Indonesia, CEPA is not only about trade, but also about fairness, respect and jointly building a strong future. This agreement must support our efforts to develop industries, create jobs and strengthen the Sustainable Development Goals.
It is learned that this comprehensive, forward-looking and mutually beneficial agreement will promote trade and investment between the two sides, drive inclusive and sustainable growth, and enhance the resilience of supply chains. Especially in terms of cooperation on key raw materials, it is of great significance to the strategic interests and industrial competitiveness of both sides. Ultimately, CEPA is expected to become a powerful platform for deepening economic relations between the two countries and a decisive achievement in their long-term bilateral relationship based on openness and rule-based cooperation.
In addition to the trade sector, the leaders of the two countries also reaffirmed their shared vision for a broader bilateral partnership. To support personnel exchanges, the European Commission has passed a visa cascade decision for Indonesia, making it more convenient and faster for Indonesia to obtain multiple-entry visas. At the same time, both sides emphasized their commitment to promoting the clean energy transition and leaving no one behind. Indonesia stated that its national policy is based on the vision of energy self-sufficiency and resilience, and welcomed the support of the "Just Energy Transition Partnership" and the EU's "Global Gateway" for its long-term goals and national priorities.
The tariff agreement between Indonesia and the United States has been implemented, and the pros and cons have drawn attention
On July 15th, US President Trump announced that a preliminary trade agreement had been reached with Indonesia, under which the US side would impose a 19% tariff on Indonesian goods. The next day, Indonesian President Prabowo responded on social media, saying that he had spoken with Trump and both sides agreed to promote trade between the two countries into a new stage of "mutual benefit and win-win".
Judging from the content of the agreement, the US side has reduced the originally proposed 32% tariff to 19%, while Indonesia has made concessions and agreed to grant "zero tariffs and zero non-tariff barriers" to US goods entering the Indonesian market. Opinions on this agreement vary among all parties.
Bima Yudistira, the executive director of the local Indonesian think tank "Center for Economic and Legal Research", believes that in the short term, Indonesia's traditional advantageous export categories such as footwear, ready-to-wear clothing, rubber and crude palm oil will maintain a certain scale. However, in the medium and long term, it is necessary to be vigilant against the squeeze effect on local industries caused by the massive influx of American products. Angavila, the secretary-general of the Indonesian Association of Young Entrepreneurs, also said that although the 19% tariff is not the highest among Asian exporters, considering the importance of the US market to Indonesia's exports, the agreement may have an impact on the country's industries.
Budi Vibowo, the chairman of the Indonesian Fisheries Processing and Marketing Enterprises Association, said straightforwardly, "The issue is not that the tariff has dropped from 32% to 19%, but that it has jumped from 0% to 19%." Even if it's just 10%, we're already struggling." Humphri Analdo Russell, director of the ASEAN-China Research Center at the University of Indonesia, has warned that against the backdrop of the United States repeatedly circumventing international rules under the pretext of "national interests", the coordination and restraint functions of the WTO are facing challenges. He suggested that Indonesia proactively explore emerging markets such as Africa and the Middle East, while strengthening regional economic cooperation within ASEAN and with partners like China.
China's textile industry is seeking opportunities to break through in a changing landscape
For China's textile industry, the changes in trade relations between Indonesia and Europe and the United States can be described as "pulling one hair and having a domino effect". In terms of export competition, Indonesia may exert certain competitive pressure on Chinese textile products in the European and American markets by virtue of the new trade terms it has reached with the European Union and the United States. For a long time, China's textile industry has held an important share in the European and American markets. Now, Indonesia is expected to expand its textile product exports in these markets by taking advantage of lower tariff thresholds and more convenient trade rules. For instance, in categories such as ready-to-wear and home textiles, Indonesian products may compete with Chinese products for market share by leveraging their cost advantages.
However, there are also opportunities behind the challenges. On the one hand, China's textile industry has significant advantages in technological research and development, product innovation and the integrity of the supply chain. Chinese enterprises can accelerate their transformation towards high-end, intelligent and green development, and launch more high value-added and high-tech products, such as textiles with antibacterial, UV-resistant and smart wearable functions, so as to avoid direct competition with Indonesian products in the mid-to-low-end market and consolidate and expand their share in the high-end market of Europe and America. Data shows that in the first five months of this year, in the face of a severe and complex external environment, China's textile and apparel exports reached 116.682 billion US dollars, at a relatively high level in history. Among them, textiles demonstrated strong resilience with a year-on-year growth rate of 3.8%, which is a powerful proof of the competitiveness of China's textile industry.
On the other hand, from the perspective of industrial chain cooperation, China and Indonesia have always maintained close ties in the textile sector. At present, Indonesia mainly relies on imports of upstream textile raw materials from China. In the future, with the development of its industry, there will be a strong demand for the localization of products. Chinese textile enterprises can take this opportunity to enhance cooperation with Indonesia in the upstream and downstream of the textile industry chain. For instance, in areas such as fiber materials and textile machinery, Chinese enterprises can offer advanced products and technical support to Indonesia, facilitating the upgrading of the country's textile industry and also expanding their own market space. Previously, the Textile Industry Branch of the China Council for the Promotion of International Trade had organized a delegation of entrepreneurs to visit Indonesia for investment research and industry exchange activities, building a bridge for industrial cooperation between the two sides.
Grasp the trend and move forward in cooperation and competition
Overall, the trade-related agreements reached by Indonesia with the European Union and the United States represent an important step in its international trade layout. These agreements not only bring opportunities for expanding markets and strengthening cooperation, but also come with problems such as industrial shocks and rule challenges. For China's textile industry, it is necessary to closely monitor these dynamics, leverage its own advantages, actively respond to competition, deepen cooperation with countries such as Indonesia in the textile field, and achieve sustainable development in the adjustment of the global textile industry pattern.
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