Cambodia: The American Tariffs, a Managed but Unequal Risk for the Kingdom's Economy

The United States imposed a 19% tariff on all goods imported from Cambodia on August 1, 2025, marking a major turning point in bilateral trade policy. This measure, negotiated after months of tensions, was hailed by the Cambodian government as a relative victory, avoiding the catastrophic scenario of a 36% tariff that could have paralyzed the country's export economy.

However, behind this apparent stability, the risks remain real and unevenly distributed, according to a recent analysis by the Asian Development Bank (ADB), which highlights the structural vulnerabilities of Cambodia's export sector.

A measured external shock, but not negligible

The ADB modeled three possible scenarios: a low tariff (10%), a medium tariff (19%) and a high tariff (36%). The results are unequivocal: the current 19% tariff, though painful, remains manageable for the Cambodian economy. It should have a negligible impact on growth, employment, and poverty in the coming years. Conversely, escalation to 36% would have disastrous consequences: a near one-percentage-point drop in the growth rate, elimination of over 100,000 jobs, and an increase in the poverty rate by more than one point. These figures, based on rigorous economic modeling and recent data from Cambodia's National Institute of Statistics, show that the margin for maneuver is narrow.

Textiles, at the heart of the storm

The textile and garment sector, which accounts for about 45% of Cambodia's exports and employs over 900,000 people, is the most exposed. Clothing exports to the United States reached $1.89 billion in 2023, nearly one-fifth of the country's total exports to that market. The 19% tariff weighs on the competitiveness of Cambodian manufacturers, whose profit margins are shrinking and orders are progressively declining. American brands, seeking lower costs, may turn to Vietnam (20% tariff), Bangladesh, or Indonesia, reducing Cambodia's market share.

Social consequences are already visible: employment contracts are shortening, social benefits are reduced, and some workers consider leaving the country in search of more stable jobs. Cambodian unions warn of the risk of increased precariousness in working conditions, similar to what happened during the COVID-19 pandemic.

Electronics, a growing but fragile sector

The electronics sector, which has experienced spectacular growth in recent years, now accounts for nearly 14% of Cambodia's exports. Electrical and electronic equipment exports to the United States reached $1.01 billion in 2024, according to United Nations COMTRADE data. This sector, less dependent on the US market than textiles, benefits from diversified markets but remains vulnerable to any tariff increases or regional supply chain restrictions.

Accelerated diversification, but...

Faced with contraction of the US market, Cambodian exporters are forced to accelerate diversification. Projections show total export revenue could drop by 13.6% in 2025, a loss of about $2.8 billion, mainly due to lower sales to the United States. Manufacturers must therefore seek new markets, notably in Asia, Europe, or Africa, but this transition carries risks: it requires significant investments in logistics, marketing, and regulatory compliance.

ADB recommendations: Social protection and competitiveness

The ADB recommends the Cambodian government strengthen social protection measures in case of tariff escalation, notably through social transfers, employment services, and vocational training programs. In the long term, it is essential to invest in economic competitiveness by improving infrastructure, human capital, and business reforms to strengthen the country's resilience to external shocks.

The 19% US tariff, while manageable, places Cambodia's economy in a precarious balance. The most exposed sectors, like textiles, must adapt quickly to preserve competitiveness, while emerging sectors, like electronics, must pursue diversification. The ADB emphasizes the need for a proactive policy, combining social protection and strategic investments, to ensure Cambodia's stability and growth in an uncertain international context.

Sources: Asian Development Bank (ADB), Policy Brief, 2025; Reuters, 2025; The Global Statistics, 2025; ASEAN Briefing, 2025​