Balancing US-China trade ties, a challenge for Cambodia

Balancing US-China trade ties, a challenge for Cambodia

With China warning last week that countries should not make trade deals with the United States at the expense of Beijing, experts say it will be a great challenge for Cambodia to strike a balance with both nations.

Cambodia is all set to begin negotiations over reciprocal tariffs with the Trump administration team after it was hit with a 49 percent tariff by the US, the highest for any Asean nation.

Sun Chanthol, Deputy Prime Minister and First Vice-Chairman of the Council for the Development of Cambodia and Cham Nimul, Minister of Commerce will be helming the negotiation talks during the 90-day pause period declared by the Trump administration on April 9.

“China firmly opposes any party reaching a deal at the expense of China’s interests,” China’s Commerce Ministry said in a statement issued last week. “If this happens, China will never accept it and will resolutely take countermeasures in a reciprocal manner. China is determined and capable of safeguarding its own rights and interests.”

Meanwhile, US Treasury Secretary Scott Bessent said earlier this month the countries currently negotiating trade deals with the US should “approach China as a group” together with Washington.

Speaking to Khmer Times, Vikas Reddy, a researcher in economics and international relations at Ohio University, said it will be a tight rope walk for the Kingdom in the coming days.

“This is going to be a great diplomatic challenge for Cambodia, definitely an unprecedented one. If you see the country’s trading patterns, you can see that China is a major supplier of imports while the US is the most important export destination.

“In 2024, China was the largest source of foreign direct investment (FDI) in Cambodia, accounting for nearly 50 percent of total investments. The country’s supply chains and value chains are also strongly linked to China.

“It’s a complex, high-stakes situation, which Cambodia will have to navigate without any errors. However, we must understand that the challenge is not just limited to Cambodia, but all countries within the Asean face it with the same intensity.”

Vichet Lor, Vice-President of Cambodia Chinese Commerce Association, told Khmer Times that Cambodia needs to capitalise on two negotiating fronts. “The country should explore bilateral frameworks and the Asean multilateral framework to negotiate to increase its bargaining power.”

He pointed out that China’s rapid ascent as a trading superpower can be traced back to 2001, the year it joined the World Trade Organisation, and since then it has started to dominate the global manufacturing landscape.

“Consequently, China’s continued rise as a manufacturing powerhouse has resulted China to become the largest trading partner for at least 60 countries, almost twice as many as the US, which remained the largest trading partner for 33 economies.

“According to the Lowy Institute, 112 economies traded more than twice as much with China as they did with the US, up from 92 in 2018 during Trump’s first trade war.

“US President’s recent ‘reciprocal tariffs’ measures are based on the premise to revive domestic manufacturing and returning jobs to the US. In reality, these measures were meant to curb and contain China’s imminent rise in global trade when “decoupling” or ‘de-risking’ is unable to tip the balance of power to the United States.

“Since 2018, many more nations have deepened their trade relationship with China at the expense of the US. Superficially, it seems the two great powers are engaging in a trade war.”

Vichet emphasised that what’s behind the curtain is actually a currency war. “This is a war between the US Dollar (USD) as a globally-functioning currency and BRICS expansion with the aim of reducing USD dominance for cross-border trade settlement instruments. As the engine of future global economic growth, the Asean region has seen Indonesia, Thailand, Malaysia and Vietnam joining BRICS as partner countries. The United States perceived this trend as an impending threat to the universal use of USD to settle international goods payments.

“Cambodia’s current international trade with both the United States and China is still relatively small compared to our regional counterparts like Thailand, Vietnam, Indonesia and Singapore.

“Cambodia’s tariff negotiations with the United States are to gain better access to the US markets with a more preferential trade regime mechanism in exchange for the Kingdom reducing tariffs on US imports. And this mechanism must be carried out without deliberately hurting the interests of any other countries, including China.”

Vichet said both the United States and China are Cambodia’s important trading partners and key contributors towards Cambodia becoming a high-income country by 2050.

“Balancing and enhancing trade relationships between these two powers will strengthen Cambodia’s economic resilience and diversification paths, culminating in a more sustainable and prosperous future to come.”

khmertimeskh