US tariffs have modest long-term impact on Cambodia, study finds

US tariffs have modest long-term impact on Cambodia, study finds

However, the report raises concern about the volatile and seemingly ad hoc nature of US tariff policy under the current administration. Frequent announcements of rate changes, often without clear timelines or strategic direction, have increased investor uncertainty.

A new economic study by the Asian Development Bank (ADB) suggests that the imposition of a 19 percent US tariff on Cambodian exports will have limited short-term effects on domestic consumption, but could lead to modest long-term economic headwinds by 2030.

Published in the ADB Economics Working Paper Series and co-authored by economists from Victoria University and the ADB, the report titled ‘Cambodia and the United States Tariff: Modeling the Economic Impacts with GTAP-FIN’ uses a sophisticated global trade model to simulate how different tariff scenarios affect Cambodia’s economy.

At the current 19 percent tariff rate, Cambodia sees a marginal increase in consumption in the short run (+0.05 percent), largely due to gains in relative pricing compared to competitors facing even higher US tariffs, such as China, Vietnam, and Bangladesh.

However, by 2030/31, Cambodia’s real consumption is projected to decline by 0.32 percent, as the global effects of reduced US import demand begin to weigh more heavily on trade volumes.

“The short-term buffer comes from Cambodia’s improved relative price position,” the report explains, “but this advantage erodes over time as broader economic adjustments take hold.”

The study emphasises how sensitive Cambodia’s economic outcomes are to changes in tariff rates. A lower 10 percent US tariff would result in a “sizable gain” for Cambodia, while a higher 36 percent rate would cause a sharp drop in terms of trade and cut real consumption by around two percent, a level of impact that could significantly affect employment and poverty levels.

In addition to direct trade impacts, the report raises concern about the volatile and seemingly ad hoc nature of US tariff policy under the current administration. Frequent announcements of rate changes, often without clear timelines or strategic direction, have increased investor uncertainty.

“This volatility has likely damaged investor confidence and capital formation,” the authors warn, suggesting that future modeling should include increased required rates of return to better capture the cost of uncertainty.

The Trump administration initially announced a 49 percent reciprocal tariff on Cambodian goods, part of a broader tariff policy based on the US goods trade deficit with numerous countries, on April 2, 2025.

Cambodia’s large trade surplus with the US, particularly in goods like garments and footwear, was a key factor.

Following initial negotiations headed by Sun Chanthol, Deputy Prime Minister and First Vice-Chairman of the Council for the Development of Cambodia (CDC), the US lowered the tariff to 36 percent. Concerns remained that this rate was still high enough to hurt Cambodia’s crucial garment and footwear industries.

The tariff was ultimately reduced to 19 percent, effective August 7, after intense negotiations and Cambodia’s concessions. This rate aligned Cambodia with other Southeast Asian nations under the new US trade regime. The US has long been Cambodia’s largest export market, particularly for garments, footwear, and travel goods, making US trade policy critical to Cambodia’s economy.

khmertimeskh