Indonesia's exports of footwear to the United States (USA) are expected to reach the value of USD $1.5 billion in 2017, up 12 percent year-on-year (y/y) from USD $1.34 billion last year. This increase is expected to come on the back of US President Donald Trump's eagerness to limit imports from China by introducing higher tariffs. This policy should now open up opportunities for Indonesian footwear exporters.
Eddy Widjanarko, Chairman of the Indonesian Footwear Association (Aprisindo), said the US economic policies under Donald Trump, who shocked markets by winning the US 2016 presidential election last November, will actually include positive benefits for Indonesia. Considering Trump is eager to curtail imports from China, Widjanarko said Indonesia needs to step in to supply to US demand. Currently, China is the leading footwear exporter to the USA, accounting for 48 percent of all of US shoe imports, while Indonesia is ranked 7th, supplying only 7 percent of total US footwear imports.
Widjanarko further adds that Trump's decision to exit the Trans Pacific Partnership (TPP) is also a positive step for Indonesia because Indonesia's competitors (for example Vietnam) will not be able anymore to enjoy cheap or zero percent import duties when exporting their footwear products into the USA (Indonesia rejected to join the TPP because authorities were concerned that the country lacks competitiveness and therefore Indonesia would then primarily serve as an importer of other TPP member nations' products due to robust demand from Indonesia's huge population). Being outside the TPP, Indonesia has to face 9 percent import duties when shipping shoes to the USA.
In full-year 2016 Indonesia exported USD $4.8 billion worth of footwear products abroad. About 28 percent of the nation's total footwear exports that year were shipped to the USA. However, as opportunities now rise, Widjanarko says the US market should absorb at least 30 percent of total Indonesian footwear exports in 2017. In total Indonesia is targeted to export USD $5.0 billion worth of footwear products in 2017.
Still, Widjanarko urges Indonesian shoe manufacturers and exporters to remain careful and closely monitor any developments in US policies as changes in US trade policies have not crystallized yet. However, considering the footwear industry is a labor-intensive industry (one that basically not exists in the USA), Widjanarko is optimistic that (non-China) footwear imports into the USA will not be burdened by high import tariffs.
Indonesia is ranked among the world's top six of largest footwear exporters and therefore this sector is an important asset to Indonesia's manufacturing industry (generating foreign exchange earnings and providing employment to part of the population). Big global players, such as Nike Inc as well as several companies from China and South Korea, all have production facilities in Indonesia as the country's labor costs are relatively low (but have risen sharply in recent years).
Indonesian Footwear/Shoe Exports 2010-2017:
Source: Indonesian Trade Ministry