US imposes 36% tariff on Cambodian exports, leaves ‘door open’ for further negotiations

US imposes 36% tariff on Cambodian exports, leaves ‘door open’ for further negotiations

Cambodia will continue to do everything to protect its economic interests, says Sun Chanthol, Deputy Prime Minister and First Vice-President of the CDC.

The United States has announced that it will impose a 36 percent tariff, down from the previous 49 percent, on all Cambodian products entering the American market, effective August 1.

Business insiders say Cambodia still has some room, but limited time, to negotiate with the US for a lower tariff.

The announcement was made in an official letter from US President Donald Trump addressed to Prime Minister Hun Manet. President Trump described the tariff as a necessary step to correct what he called an “unfair” and “persistent” trade imbalance between the two countries.

“Our trading relationship with Cambodia has been far from reciprocal,” President Trump wrote, adding, “Starting August 1, 2025, we will charge Cambodia a tariff of 36 percent on any and all Cambodian products entering the United States.”

President Trump said the decision follows years of discussions aimed at achieving a more balanced and fair trade relationship. The 36 percent tariff is intended to address the growing US trade deficit with Cambodia, which he described as unsustainable and a potential threat to US national security.

The letter also warned that any attempts to bypass the tariff through transshipment of goods via third countries would result in even higher tariffs.

To mitigate the impact, President Trump suggested Cambodian companies could avoid tariffs by relocating manufacturing or investment operations to the United States. He promised expedited government approvals to facilitate such moves.

“If Cambodia, or companies within your country, decide to build or manufacture products in the United States, we will do everything possible to secure approvals quickly, professionally, and routinely—in a matter of weeks,” the letter stated.

The US president further warned that if Cambodia decides to raise tariffs on American goods, it would prompt an equivalent increase on top of the 36 percent tariff already announced. However, if Cambodia opens its markets by removing existing tariff and non-tariff barriers, the United States would be willing to reconsider or adjust the tariff rate.

“These tariffs are necessary to correct many years of Cambodia’s tariff and non-tariff policies and trade barriers,” the letter said. “We look forward to working with you as a trading partner for many years to come. You will never be disappointed with the United States of America.”

Meanwhile, in a social media post on July 6, President Trump made clear that the policy reflects a broader stance against countries perceived as aligning with anti-American blocs.

“Any country aligning themselves with the anti-American policies of BRICS will be charged an additional 10 percent tariff. There will be no exceptions to this policy,” Trump said.

Sun Chanthol, Deputy Prime Minister and First Vice-President of the Council for the Development of Cambodia (CDC), Tuesday said that Cambodia has successfully negotiated the largest reciprocal tariff reduction among 14 countries targeted by the United States.

Speaking at a press conference on the US tariff decision, Chanthol said that Cambodia’s tariff rate on exports to the US will be reduced by 13 percent, from 49 percent to 36 percent, effective August 1.

“At this point, we have been very successful in negotiating this rate with the United States, and this achievement is the result of good-faith negotiations, as highlighted by Prime Minister Hun Manet,” he said.

He stressed, however, that the decision is not yet final, as a letter from US President Donald Trump has “left the door open” for further discussions before the new tariff takes effect.

“Our team stands ready to engage further with the United States to seek an additional reduction in the reciprocal tariff rate,” Sun Chanthol said. “It is important to stress that this tariff rate has not yet been finalised, we still have the opportunity to negotiate.”

The Deputy Prime Minister also called on companies operating factories in Cambodia to remain calm as the government is fully committed to safeguarding employers, workers, and the interests of the Cambodian people.

“The government will continue to do everything in its power to protect our economic interests,” he affirmed.

The tariff adjustment comes as part of a broader shift in US trade policy, which impacts 14 countries, with Cambodia receiving the largest reduction. Cambodian officials are optimistic that continued dialogue could lead to a more favourable outcome ahead of the August 1 deadline.

The Cambodian government has yet to issue an official response to the US announcement. The new tariff is expected to affect a wide range of exports, including garments, footwear, bicycles, and agricultural products—all sectors heavily reliant on the US market.

The United States remains one of Cambodia’s largest export destinations. Analysts warn the 36 percent tariff could have significant consequences for Cambodian businesses, employment, and the broader economy if no resolution is reached.

Casey Barnett, President of the American Chamber of Commerce in Cambodia, said the country could reduce the proposed tariff rate within the next three weeks if it agrees to certain US conditions.

Speaking to Khmer Times, Barnett said, “Cambodia can significantly lower this rate in the next three weeks if it accepts US conditions, including duty-free access to the Cambodian market, fast-tracking US technology licensing, and limiting Chinese military and policy cooperation.”

He added that uncertainty over the tariff rate is already affecting investor confidence. “Investors will likely pause their investment plans until a final rate is determined at the end of July. If the 36 percent rate comes into force, new investors will choose countries with lower tariffs, such as Egypt, which pays only 10 percent to the US.”

Barnett also noted Cambodia’s long-standing alignment with China may influence the decision. “Cambodia has been strongly aligned with China for 20 years, and this 36 percent tariff will likely reinforce Cambodia’s dependence on China for infrastructure investment,” he said.

The final US decision on the tariff rate is expected by the end of this month.

Raymond Sia, CEO of Canadia Bank, said the decision has been made for 14 countries, excluding China, the UK, and Vietnam, which had earlier decisions. While there may still be limited room for further negotiations, the final word from the US administration could very well be a “take it or leave it” situation.

“The verdict is out (for 14 countries below, besides China, UK and Vietnam earlier) and while there is still probable and limited room for further negotiations, the final remarks from the US administration may still be ‘take it or leave it’,” Sia said.

“So what’s next?” he asked, highlighting that the reality has now set in and exporting countries, especially from emerging markets to the US, urgently need to address three key areas if they have not done so already.

“First, productivity. Improvements in efficiency and getting the final product ready as quickly as possible become more important, especially from an overall cost of production angle,” Sia explained.

“Second, value-add. Exporting countries with low or no value added in their products will face more headwinds as generic products are often only competitive from a price angle.

Conscious efforts will need to be placed to up the ante, to improve workforce capabilities and to leverage technology to hasten this transformation,” he said.

“Third, new markets. Easier said than done, considering how significant the US market is, but there are still opportunities to diversify and seek new markets. And No. 1 and No. 2 above will be key critical success factors to support this point,” he added.

The new tariff is part of a wider trade adjustment by the United States that affects multiple countries and is likely to have an immediate impact on Cambodia’s export sectors.

Similarly, Cambodia still has time to negotiate with the United States over the proposed 36 percent tariff on Cambodian products, according to Lor Vichet, Vice-President of the Cambodia Chinese Commerce Association (CCCA).

Speaking to Khmer Times, Lor Vichet said, “If we look at the situation from one side, we see that the US government has given us about 23 days before the new tariffs take effect on August 1. This means there is still time—both diplomatically and through negotiations—for us to submit a proposal for a lower tariff.”

He stressed that the proposed tariff rate is not yet set in stone. “The imposition of the 36 percent tariff is not a final decision. We still have time and space to negotiate with the US,” he added.

Vichet pointed out that the US accounts for 40 percent of Cambodia’s total exports, making it the Kingdom’s largest export destination. “It is of utmost importance and the top priority for Cambodia to negotiate with all available options to ensure better and greater market access to American consumers with a preferred tariff rate before August 1,” he said.

“With a preferred tariff rate in place, Cambodia will have greater access to the US market, creating more employment opportunities while retaining its competitiveness relative to other ASEAN countries,” he explained.

He also urged Cambodia to adopt a reciprocal approach in negotiations, similar to strategies used by other countries. “For example, countries like Thailand promise to buy airplanes and agricultural products from the US to maintain smooth market access. Vietnam spares no effort in negotiating trade agreements with the US,” he said.

“It’s like a trade exchange, if we expect the US to lower tariffs for us, but we don’t increase our imports from them, it could make our negotiations less effective,” he warned.

Vichet suggested that Cambodia should consider increasing its purchases from the US as part of the bargaining strategy. “We should use the strategy of buying more from their country so that they buy more from ours. This way, the US would have no excuse not to lower tariffs on Cambodia. For example, we could set a target to purchase $1 billion worth of goods from the US. When they see the actual figure, it demonstrates our willingness to negotiate. Other countries often promise to increase their imports, but they rarely present a clear target,” he said.

He emphasised that timely and strategic negotiation is crucial to securing Cambodia’s export interests and sustaining economic growth.

President Trump signed an Executive Order on July 7, extending certain tariff rates until August 1. New reciprocal tariff rates will take effect on that date for several countries. Laos and Myanmar will face a 40 percent tariff. Cambodia’s tariff rate is set at 36 percent, same as Thailand.

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