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Indonesia's palm oil producers association, GAPKI, has warned that Indonesia could lose its palm oil market to Malaysia if Jakarta fails to secure a trade deal with the US government that gives it a lower tariff rate than its neighbour.
Fadhil Hasan, head of international affairs at GAPKI, said during a talk show on Beritasatu TV at B-Universe Media Holdings' studios in Pantai Indah Kapuk 2, Tangerang, on Tuesday 15 July 2025, that US President Donald Trump had decided in his latest round of tariffs to keep the import duty on Indonesian products at 32%. By contrast, he raised tariffs on Malaysian products by one percentage point, though they remain considerably lower at 25%.
Indonesia and Malaysia together account for 80% of global palm oil production, and the United States imports the oil from both Asian nations. Although the negotiating deadline remains open until 1 August, GAPKI hopes Jakarta will succeed in securing a lower tariff than Malaysia.
Both countries are currently subject to a baseline tariff of 10%, which will rise to the higher rates mentioned above should they fail to reach an agreement with the Trump administration.
"Around 85% of US palm oil imports come from Indonesia. So if these tariffs are implemented, it would only be natural for the US to start importing more palm oil from Malaysia instead of Indonesia, and that is what worries us," Fadhil said.
According to GAPKI data, Indonesia's palm oil exports to the United States reached 2.2 million tonnes in 2024, valued at around US$2.9 billion. Official statistics also showed that Indonesia's total palm oil exports amounted to US$8.9 billion between January and May 2025, at a volume of around 8.3 million tonnes, with Pakistan, India and China remaining the largest buyers.
Malaysia, meanwhile, exported 191,000 tonnes of palm oil to the United States last year, according to the Malaysian news agency Bernama.
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The looming tariffs have sparked discussion about the need to expand into new markets, something GAPKI itself has acknowledged.
Indonesia recently made significant progress in negotiations on a Comprehensive Economic Partnership Agreement (CEPA) with the European Union, with both sides reaching a political agreement to finalise the deal by September. While this is good news for Jakarta's efforts to diversify its markets, Fadhil noted that the CEPA has not yet fully addressed the non-tariff barriers hampering Indonesian palm oil exports to Europe, such as the anti-deforestation regulation, which requires proof that the oil is not sourced from deforested land.
GAPKI has also called on the Indonesian government to conclude trade agreements with other markets such as Turkey, something the government is already working on.
"Trade diversification is essential given Trump's threats and the EU's still-incomplete restrictions. We can diversify our palm oil exports towards African and Mediterranean markets. Perhaps we can also push forward a trade agreement with Turkey — it used to import mainly from Indonesia, but we lost that market to Malaysia simply because it signed a free trade agreement with Ankara," Fadhil added.
Indonesian President Prabowo Subianto discussed this trade agreement with his Turkish counterpart Recep Tayyip Erdogan last February, with both leaders expressing their intention to develop a limited preferential agreement by 2026, alongside efforts to sign a comprehensive CEPA covering various economic areas.
Source: Bernama