US imposes 10% tariff on Cambodia, below ASEAN rivals

US imposes 10% tariff on Cambodia, below ASEAN rivals

The lower tariff could help enhance Kingdom’s attractiveness as an investment destination, as companies seeking to export products to the US may consider establishing production bases in this country.

The United States Trade Representative (USTR) on Friday imposed a new 10 percent tariff on Cambodian goods entering the US market, placing the Kingdom in a more favourable position than several ASEAN rivals, including Thailand and Vietnam.

The new duty is part of the USTR’s Section 301 action targeting 60 economies that Washington determined had failed to adequately prohibit or enforce restrictions on imports made with forced labour.

The USTR first announced the proposed action on June 6, identifying Cambodia among economies that could face additional tariffs over concerns related to forced-labour import restrictions.

Under the initial proposal, Cambodia was listed among countries facing a 12.5 percent tariff. Governments, businesses and other stakeholders were invited to submit comments on the proposed measures, with the consultation deadline set for July 6.

Following the consultation process, the USTR issued its final decision on July 23 (US time), placing Cambodia, Indonesia and Malaysia in the lower 10 percent tariff tier, while Vietnam, Thailand, Singapore and the Philippines were assigned the higher 12.5 percent rate.

In an interview with Bloomberg on Friday, Deputy Prime Minister and First Vice-Chairman of the Council for the Development of Cambodia Sun Chanthol welcomed the decision, saying the 10 percent tariff was lower than those imposed on some key regional competitors.

“We are very pleased with the rate that we received today regarding Section 301 on forced labour. The rate ranged between 10 percent to 12.5 percent, but Cambodia received the 10 percent,” he said.

However, Chanthol noted that Cambodia is still awaiting the outcome of another US Section 301 investigation concerning excess capacity, expressing hope that any additional tariff resulting from that separate review would not exceed 9 percent.

“The two components–the forced labour and excess capacity–could add up to around 19 percent or less, based on what we agreed under the Agreement on Reciprocal Trade (ART) with the United States,” he said, noting that Cambodia is the first country in the world to sign the ART on October 26 last year.

On the same day, Minister of Commerce Cham Nimul also told Bloomberg that Cambodia worked with three ministries to introduce additional measures aimed at preventing imports associated with forced labour. “With that, the ability to maintain the rate below 19 percent is a possibility for Cambodia,” she noted.

Nimul explained that Cambodia is also negotiating a quota system with the US, alongside Bangladesh, Indonesia and Malaysia, which would allow garment manufacturers to source raw materials from the US, process them in Cambodia and re-export finished products to the US market with quota-free and duty-free treatment.

She further emphasised that the Royal Government continues discussions with the US on broader trade arrangements, including possible cooperation involving the use of US-made raw materials in Cambodian production.

According to the White House announcement, Cambodia was among economies that adopted a prohibition on imports made with forced labour following consultations with the USTR, a factor considered in applying the 10 percent tariff tier.

The latest tariff action comes amid wider legal challenges against President Donald Trump’s tariff policies. In February, the US Supreme Court ruled against his administration’s use of the International Emergency Economic Powers Act (IEEPA) as the legal basis for broad reciprocal tariffs, creating uncertainty over some earlier tariff measures.

The Trump administration later relied on other trade authorities, including Section 301 of the Trade Act of 1974, which allows USTR to investigate and respond to unfair trade practices. The forced-labour tariff imposed on Cambodia was introduced through this separate process following a USTR investigation.

Speaking to Khmer Times, Dr Sam Soknoeun, Vice President of the Board of Directors of the Federation of Associations for Small and Medium Enterprises of Cambodia (FASMEC), said the US’ decision to impose a 10 percent tariff on Cambodian imports places the Kingdom in a relatively better position than several regional competitors.

Soknoeun, also Chairman of SAM SN Group, noted that the lower tariff could help enhance Cambodia’s attractiveness as an investment destination, as companies seeking to export products to the US market may consider establishing production bases in the Kingdom.

“Actually, this is good news for Cambodia,” he said, congratulating the Royal Government’s efforts in negotiating with US authorities to secure the lower rate.

He added that foreign direct investment (FDI) plays an important role in supporting economic growth, creating more job opportunities, expanding production capacity and strengthening Cambodia’s integration into regional and global supply chains.

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