Trump tariffs hit ASEAN footwear as investors quit Indonesia

Foreign footwear manufacturers are scrapping investment plans in Indonesia, while factories in Vietnam are rushing to adopt automation and slowing new hiring as US tariff measures begin to bite, according to a Nikkei Asia report.

The slowdown in US demand is also pushing Asian producers to look for new markets. However, some American buyers have signalled they do not intend to abandon long-standing suppliers in the region, raising questions over whether the tariffs will achieve Washington’s stated aim of driving manufacturing back to the United States.

Vietnam and Indonesia are the world’s second- and third-largest footwear exporters by volume after China. In 2024, Vietnam exported about 1.58 billion pairs, while Indonesia shipped roughly 601 million pairs; Cambodia also ranked among the top 10 exporters.

Following protracted negotiations, the United States set “reciprocal” tariff rates at 19% for goods from Indonesia and Cambodia, and 20% for goods from Vietnam.

Yoseph Billie Dosiwoda, executive director of the Indonesian Footwear Association, said the uncertainty created by the tariffs had led some investors to cancel plans to build factories in the country. He said investment sentiment was weakening and expressed hope the US rate could be lowered to 15% or 10%.

Dosiwoda said demand for Indonesian footwear in the US fell by around 23% in the first nine months of 2025, which he linked to weaker American purchasing power. He warned that if tariffs remained “above 15%”, Indonesian-made products would become uncompetitive due to higher production costs and relatively low labour productivity.

He also called for domestic deregulation to lift productivity, improve the investment climate and adjust wage structures, as labour groups push for higher pay. Vietnam, meanwhile, is preparing a nationwide minimum-wage increase.

Vietnam’s national statistics data showed footwear exports to the United States fell 4% year on year in November, after a 13% decline across the previous three months. Companies have responded by seeking new customers, cutting costs and shifting towards higher-priced products.

One factory executive overseeing tens of thousands of workers said rising costs were being shared between buyers and producers, adding that many plants were stepping up automation. 

Maybank economist Brian Lee told Nikkei Asia that weaker external demand could weigh on employment trends, with companies becoming more cautious about hiring.