As supply chains become increasingly globalized, unilaterally imposed regulations raise tensions between national sovereignty and their extraterritorial consequences on economic development. While the European Union has the right to regulate its supply chains, such policies can have severe implications for smallholders in commodity-producing countries who are often underrepresented in the policy-making process. Through a case study on the impact of the EU Deforestation Regulation (EUDR) on Indonesia’s palm oil industry, this paper explores how supply chain regulations can reinforce existing inequalities in transnational trade at the industry and international level. By analyzing the responses and actions taken by industry stakeholders and government actors following the introduction of the EUDR in 2023 – drawing on secondary interviews and reports – this study reveals how unilateral supply chain regulations can disproportionately impede smallholder market access and deepen asymmetries between the Global North and commodity-producing nations.