Cambodia dodges tariff shock but faces fragile trade future

HRW

Cambodia has narrowly avoided a major economic blow after the United States imposed a 19% tariff on its exports—far lower than the 49% rate initially proposed. According to a new Asian Development Bank (ADB) study, the current tariff is manageable, but the Kingdom’s trade stability remains vulnerable to shifting global politics.

The tariff, effective since August 2025, affects a broad range of Cambodian goods, including garments, footwear, travel items and electronics—sectors that employ hundreds of thousands and form the backbone of the economy. The US remains Cambodia’s top export destination, accounting for a third of its exports and a quarter of GDP.

Despite concerns, Cambodia retains a competitive edge. Rivals like Vietnam, Bangladesh and China face average tariffs of 24%, giving Cambodia a relative advantage among low-cost exporters. The ADB’s modelling shows that the 19% rate has had minimal impact on GDP so far.

“Economic modelling confirms that the current tariff is indeed manageable,” said Milan Thomas, ADB Country Economist for Cambodia. “But a higher rate would have dire consequences for Cambodian families.”

Indeed, if Washington moves ahead with a 36% tariff—still under consideration—the fallout could be severe. GDP could shrink by nearly 1%, with garment and footwear output dropping over 2%. The social cost would be steep: up to 130,000 job losses, mostly among women in factory roles, and a rise in poverty affecting tens of thousands of households.

The ADB also warns of fiscal strain. A higher tariff could slash government revenue by $600 million, exacerbating budget pressures already stretched by the return of nearly 900,000 migrant workers from Thailand.

To shield itself, Cambodia must accelerate economic diversification. While garments and footwear will remain central, the ADB urges investment in domestic production, value-added processing, and expansion into services and light manufacturing.

Arnaud Darc, Co-Chair of Cambodia’s Government-Private Sector Forum, welcomed the White House’s decision to cap tariffs at 19%. “This prevents severe disruption,” he said, but stressed that “the next 100 days will determine whether Cambodia stabilises its US trade position.”

For now, Cambodia remains competitive—but its future hinges on decisions made far beyond Phnom Penh.

-2025-11-12