Economy & Cambodia: Between Respite and Wounds — The 19% Alarm

Cambodia narrowly avoided economic disaster, but the country continues to suffer from deep wounds. Behind closed doors, 800,000 jobs, mainly in the textile and footwear sectors, were threatened by the announcement of new US tariffs. The axe has fallen: Cambodian exports to the United States will now be taxed at 19%, according to a presidential decree signed by Donald Trump on 31 July 2025, confirmed by the Executive Office and reported by the major US economic media outlets.

Based on an analysis by Arnaud Darc

This rate, which is well below the 36% or 49% feared during negotiations, is certainly a relief in the short term, but it should not obscure the seriousness of the situation. A tariff shock of this magnitude is a seismic shock for a sector accustomed to tiny margins, particularly in the manufacture of basic clothing, travel bags and low-value-added footwear.

For major American retailers, which operate on a seasonal cycle, the impact of this measure will be felt as early as the fourth quarter of 2025 — a reality for which manufacturers and workers in the Kingdom are already preparing.

An Unexpected Breath of Fresh Air, But a Persistent Emergency

If the rate had been maintained at 36% to 49%, the Cambodian economy would have faltered, with order cancellations, widespread closures, bank failures and mass unemployment. According to the International Labour Organisation, more than 800,000 formal jobs depend on the textile sector, not counting indirect links to the national economy. At 19%, Cambodia remains competitive, on a par with Vietnam and Bangladesh (whose exports to the United States are taxed at 20% according to data from the US Department of Commerce). But the slightest mistake will be fatal: if electricity costs do not fall by at least 15% or if port charges remain above the regional average, the country will lose its modest advantage over its neighbours.

The Margin War Begins, On Unfavourable Ground

The reorganisation of global sourcing, under geopolitical constraints, is already underway. A rate of 19% will lead to the transfer of production of high-volume, low-margin items — T-shirts, synthetic trainers — to Bangladesh or Kenya (benefiting from AGOA). Segments requiring quality control and compliance (backpacks, technical clothing) could remain in Cambodia, provided that social traceability and logistical speed are maintained.

For niche production, the flexibility and proximity of Vietnamese textile hubs will be key to survival. According to estimates shared at the last industry forum, the consequences will be visible in four waves: from October 2025, spring-summer 2026 orders will be adjusted to the new cost; in early 2026, a selection will be made between factories that retain their US customers and those forced to close.

Diplomacy Limited the Damage, But the Lesson is Bitter

The 19% rate is the result of discreet diplomacy by the Cambodian government with the USTR (United States Trade Representative), according to sources close to the Ministry of Commerce. But this partial victory does not hide the signal sent by Washington: the redefinition of US supply chains will not stop at semiconductors.

The global trend is towards reducing dependence on countries considered geopolitically ambiguous. Cambodia's alignment – real or perceived – with China was enough to place the Kingdom in the risk zone. This tariff is therefore not simply an economic measure: it marks a strategic rebalancing and a warning to the entire ASEAN. Alignment, or at the very least clarification of positions, is becoming essential.

Four Priorities to Avoid the Worst

The time for reaction is over; it is now time for action. The immediate challenge can be broken down into four areas:

1. Lower industrial electricity costs by 15% through tariff reform by the MEF and EDC, the abolition of solar taxes and group purchasing.

2. Launch an offensive to retain major buyers by bringing together the 20 largest US contractors within 60 days, led by the CCC and the Ministry of Commerce.

3. Diversify export markets: accelerate the analysis of accession to the CPTPP for the first quarter of 2026, relaunch technical dialogue with the EU, and position Japan and the Gulf countries as strategic partners.

4. Protect and strengthen workers' skills: create a socio-professional transition fund by November, focused on retraining and training in agribusiness, electronics and hospitality.

A large-scale project, similar to a ‘Cambodia Resilience Compact’ led by an interministerial committee, should facilitate industrial, logistical and social adaptation. Individual solutions will not be enough in the face of a systemic shock.

The ultimatum has been issued, but the opportunity remains to be seized

Cambodia has avoided the abyss, but the ordeal is only just beginning. A 19% customs duty is not a neutral sanction, it is a rude awakening. The Kingdom now finds itself in a storm zone, at the crossroads of the region's commercial, diplomatic and strategic challenges.

The next twelve months will be decisive: will Cambodia be able to reinvent itself as a resilient economy, or will it remain an example of failed reform? This challenge is not just about numbers: it tests our collective ability to anticipate, mobilise and turn adversity into an asset. The time for waiting is over. Everything is at stake right now.