The purpose of this paper is to reveal how the clove ‘strootje’ (native tobacco product) industry of Netherlands India reacted to the crisis driven by the tobacco tax in the 1930’s. At the end of the 1920’s, many enterprises of this industry cut production because of the rise in price of raw materials. Then, the tobacco tax in 1932 drove this industry into a more critical situation. Many enterprises of Kudus where the clove ‘strootje’ industry had appeared had to stop operation as well. This problem was brought up for discussion in the colonial legislature so that the government decided to levy the tax at a lower rate on hand-made ‘strootje’ and cigarettes than on those manufactured by machine. Consequently, the enterprises in Kudus gradually recovered and restarted expanding the business. The feature of this industry in Kudus was continuation of the ‘abon’ system that was the cottage industry. As a result, the Javanese enterprises of this industry in Kudus were superior to the Chinese enterprises even in the latter half of the 1930’s.