Industry Impact
Cambodia’s exports to the US surged 27.5% to USD 4.47 billion in the first four months of 2025, with total bilateral trade reaching USD 3.29 billion (up 22.6% year-on-year). The US remains Cambodia’s largest export market, while US imports to Cambodia increased 34.8% to USD 97.8 million.
Cambodia faced a 49% US tariff in April 2025 due to alleged unfair trade practices, making it the hardest-hit ASEAN country under Trump’s tariff policy (refer to Page 3, Aquarii’s Connecting Dots February – March 2025 Edition). The tariffs were later suspended for 90 days and reduced to 10% until July for non-retaliating countries.
High-Stakes Negotiations
Following Prime Minister Hun Manet’s letter to President Trump, Cambodia and the US engaged in Trade and Investment Framework Agreement (TIFA) negotiations in Washington D.C. on 13-15 May 2025. A 19-member Cambodian delegation led by Deputy PM Sun Chanthol addressed key issues, including:
• Trade imbalance and concentration risk
• Transhipment prevention (Chinese goods evading US tariffs)
• Supply chain integrity and origin fraud
• National security concerns (Ream Naval Base)
• Regional stability and diplomatic cooperation
Cambodia has taken proactive steps to address US concerns:
• Issued regulations (Ministry of Commerce Prakas No. 047 and Inter-Ministerial Prakas No. 379) to combat origin fraud
• Reduced import duties on 19+ US products from 35% to as low as 5% or zero
• Opened Ream Naval Base to international partners (Japan, Philippines, Vietnam, China, Russia)
Economic Risks and Diversification Strategy
Currently, the USD 12 billion US export relationship represents 44.6% of Cambodia’s total exports, creating dangerous over-dependence. Experts warn that losing US market access would trigger severe macroeconomic consequences, including export revenue collapse, garment sector contraction affecting 1.8 million workers, currency pressure on the Riel, and depletion of foreign reserves.
Alternative Market Development
Cambodia is pursuing trade diversification to reduce US dependency through:
1) Regional Integration:
Deepening ASEAN and RCEP partnerships for broader market access.
The Regional Comprehensive Economic Partnership (RCEP), comprising 15 Asia-Pacific countries – the 10 ASEAN countries and their five trading partners, namely China, Japan, South Korea, Australia and New Zealand – is a vast market with significant purchasing power, as its combined population exceeds 2.3 billion people. RCEP exports reached USD 9.06 billion in 2024 (up 12.8%), representing 33.9% of Cambodia’s total exports to the 15-member bloc’s 2.3 billion consumer market. The agreement eliminates 90% of intra-regional duties, providing a stabilizing force against US protectionism.
2) Zero-Tariff Markets:
Leveraging preferential access to EU, Japan, Canada, Australia, and UK.
3) Infrastructure Enhancement:
Completing Techo International Airport, Funan Techno Canal and China’s BRI railway projects to reduce logistics costs.
4) Sectoral Modernization:
Chinese investment in agriculture and electric vehicle manufacturing, supported by expanding China-Cambodia trade that reached USD 7.63 billion in the first four months of 2025 (up 27.5%). The Cambodia-China Free Trade Agreement (CCFTA) has facilitated this growth, enabling Cambodia to export agricultural products like rice, cashews, and cassava while importing essential raw materials and industrial equipment.
However, this deepening relationship creates new dependencies, as Cambodia’s manufacturing sectors—particularly garments and footwear—rely heavily on Chinese inputs. Trade experts warn this could pose long-term vulnerabilities and recommend developing local supply chains for materials like fabric, zippers, and buttons to reduce import dependence and achieve greater economic balance.
Source:
• Cambodia-US tariff talks, experts are cautiously optimistic | Khmer Times (khmertimeskh.com)
• US’s flip-flop policy, what should Cambodia do next? | Khmer Times (khmertimeskh.com)