Threat of Mass Layoffs Looms Over Indonesian Furniture Industry Due to New US Tariff Policy

JAKARTA, July 15, 2025 – The US President's policy of implementing a 32% tariff on imported products from Indonesia has the potential to create a major shock for export-oriented industries. One of the most vulnerable sectors is the furniture industry, which is expected to face a wave of mass layoffs.

HIMKI Chairman, Abdul Sobur, revealed that based on HIMKI's internal simulations, if no concrete mitigation steps are taken, up to 270,000 workers could gradually lose their jobs.

The main cause of this potential for mass layoffs is a sharp decline in demand in the US market due to price increases for Indonesian products, estimated to be between 20-35%. For illustration, a wooden chair product normally sold for US100perunitcouldseeitspricejumptoUS120-135 per unit with this tariff.

"This price increase will certainly suppress demand. US buyers, who are very price-sensitive, will easily switch to competing countries," said Abdul Sobur. The high price of Indonesian furniture products will reduce US consumer interest, which ultimately leads to a drop in orders, reduced production capacity, and industry players bearing high fixed costs. "This is what triggers the potential for mass layoffs," Abdul Sobur emphasized.

Indications of Weakening Demand and Impact on Production Centers Related to Mass Layoffs

When Indonesian products lose competitiveness, domestic production stalls, leading to a drastic decrease in work for orders. Abdul Sobur stated that signs of this weakening are already visible.

"Currently, demand from US buyers has started to weaken," he revealed. Several HIMKI members in major production centers such as Jepara, Pasuruan, Cirebon, Sukoharjo, and surrounding areas have already complained about a 20-30% decrease in orders compared to last year. A number of small and medium-scale factories are reported to have started reducing working hours, and even downsizing their workforce in an effort to survive.

Industry Optimism and Mitigation Steps

Despite facing major challenges, business players remain optimistic and vigilant. HIMKI stated that it will deploy all diplomatic channels, collaborate with relevant ministries, and seek joint business solutions with its members to avoid the impact of mass layoffs.

One of the strategies is to accelerate production relocation or diversify products into segments with higher added value and less sensitivity to tariff wars, such as customized products, luxury products, or products made from sustainable raw materials.

"We also encourage domestic incentive policies, such as tax incentives, cheap financing, and domestic purchase stimulus to maintain production turnover and employment," said Abdul Sobur.

Developments in US Tariff Negotiations

On the other hand, there are positive developments from the government's efforts. The Coordinating Minister for Economic Affairs, Airlangga Hartarto, revealed that Indonesia has received a postponement of the application of the 32% US reciprocal tariff. This postponement was obtained after negotiating with US Secretariat of Commerce Howard Lutnik and United States Representative Jamieson Greer on July 9, 2025.

Airlangga returned to the US in response to President Trump's announcement to maintain the 32% tariff after 90 days of negotiation, since the first tariff war policy was announced in April 2025.

"So, firstly, the additional 10% (BRICS members) is not there. Secondly, the time is what we call a pause, so a postponement of the implementation to complete the ongoing negotiations," Airlangga said in Brussels, Belgium, Sunday (13/7/2025).

Airlangga explained that from his visit to Washington, US, Indonesia was given three weeks to conduct further negotiations to finalize the talks. "So, these three weeks are expected to finalize the fine-tuning of the proposal and the fine-tuning of what has been exchanged," he added.

Source: CNBC Indonesia. The full article "Industri RI Ini Ancang-ancang PHK Besar-besaran karena Ulah Trump" can be accessed at: https://www.cnbcindonesia.com/news/20250714150449-4-648942/industri-ri-ini-ancang-ancang-phk-besar-besaran-karena-ulah-trump