- Malaysia matches Indonesia’s US tariff rate, labour concerns linger
- Indonesia and Malaysia unite against anti-palm campaigns … though Malaysia’s labour compliance issues persist;
- Indonesia’s 0% EU tariff on 1 million tons of CPO may prove hollow if EUDR requirements and CVD duties remain unchanged
The tariff differential between Indonesia and Malaysia that looked to tile US palm oil markets towards Indonesia has disappeared. The Trump administration has confirmed that Malaysia’s tariff rate with match Indonesia’s 19% reciprocal tariff with the United States, eliminating a possible US$54-84/ton landed cost disadvantage for Malaysia.
Immediate pricing pressure on Malaysian exporters are now gone, but labour compliance requirements remains as a risk for Malaysian producers. WROs (Withhold Release Orders) affecting several major Malaysian palm companies are still in place.
However, at the same time, Indonesian President Prabowo and Malaysian Prime Minister Ibrahim pledged to “collaborate on promoting sustainable palm oil and counter negative campaigns against palm oil” during their annual bilateral meeting in Jakarta this week.
The joint statement specifically targets environmental lobbying “particularly in the West” that has constrained demand growth in premium markets. They both cited the EU’s deforestation regulation (EUDR) as emblematic of discriminatory measures that “unfairly target oil palm producers and place undue pressure on smallholders.”
The Indonesia-Malaysia summit also produced commitments to “improve the protection of basic rights, welfare and livelihood of Indonesian migrant workers in Malaysia.” With 1.5 million Indonesians employed in Malaysian plantations and other sectors, labour practices increasingly intersect with trade policy.
Both nations agreed to review recruitment agreements and establish mechanisms to “address all issues pertaining to Indonesian migrant workers in a comprehensive manner.” This responds to declining Indonesian interest in Malaysian employment due to regular abuse reports.
For palm oil specifically, improved worker protections could help Malaysian producers clear CBP scrutiny and restore full US market access. However, implementation timelines remain vague, leaving near-term compliance status unchanged.
Although the promise to collaborate is a re-run of years of statements from both countries – and part of the mission of CPOPC – the fact that it continues to be a part of Indonesia-Malaysia discourse and represents and official position indicates the resentment towards Western environmental campaign runs continues to run deep.
Western NGOs have, for their part, been relatively quiet in 2025. This is in part because they are coming under increased attack at home. In the EU, the European Peoples’ Party (EPP) has been happy to support an investigation of NGO funding from EU institutions. In the US, the aid-foundation-NGO complex has also been under fire from the Trump administration. We’ll have more on that in the coming weeks.
They have, for example, remained relatively quiet on the likely completion of the Indonesia-EU FTA in September, which will promise a lower tariff rate for palm oil products.
Coordinating Minister for Economic Affairs Airlangga Hartarto confirmed that the Indonesia-EU Comprehensive Economic Partnership Agreement (IEU-CEPA) will grant zero-tariff access for up to 1 million tons of Indonesian CPO and additional quotas for palm kernel oil (PKO).
The agreement theoretically opens European markets to Indonesian palm products. However, industry stakeholders warn that tariff elimination means little if non-tariff measures remain prohibitive.
The EUDR’s requirement for plot-level geolocation data and deforestation-free verification continues to impose substantial compliance costs. More immediately, EU countervailing duties (CVD) on palm oil derivatives – imposed to offset Indonesian export taxes and subsidies – remain unchanged under the IEU-CEPA framework.
But how valuable the agreement is remains to be seen. As GAPKI – the Indonesian Palm Oil Association — has noted:
“The IEU–CEPA will be useless if the non-tariff barriers of EU, such as the European Union Deforestation Regulation (EUDR), are still applied against our palm oil products. The tariff could be zero percent, but if our products are considered unable to comply with the regulations, then our products cannot enter the EU market.”