As new US tariffs loom large over Cambodia’s export landscape, the Kingdom’s resilience and strategic measures to navigate these economic uncertainties remain crucial.

The tariffs, announced on April 2, have created significant concern, especially for Cambodia’s textile sector, which has partly long been reliant on the US market.

While the exact impact of these tariff hikes is still unfolding, both the government and key stakeholders are working hard to assess and respond to the situation.

“The situation is evolving, and we cannot yet put absolute numbers on the impact. But it is clear that there will be adverse effects if things stand as they are,” said Jyotsana Varma, country director for the Asian Development Bank (ADB).

“Our concern is that there would be an impact on the poor and vulnerable people. And so, you did talk about data-free financing. That is where we support the government,” she said, during the April 9 launch of the ADB’s Asian Development Outlook (ADO) April 2025.

Before the announcement of the tariffs, Cambodia’s economy was forecast to grow by 6.0% in 2024, rising slightly to 6.1% in 2025 and 6.2% in 2026, according to Milan Thomas, ADB country economist.

While macroeconomic fundamentals remain strong — including a low debt-to-GDP ratio and stable inflation around 2.5% — Thomas highlighted trade policy uncertainty, particularly from the US, as a major risk.

Asian Development Bank (ADB) leadership meet with Cambodian journalists. Hong Raksmey

“If you ask what the tariff rate on Cambodian textile exports will be next month, no one knows. That’s how uncertain the landscape has become,” he said, emphasising the volatility that Cambodian exporters are now facing.

Thomas warned that the unpredictability in US trade policy could overshadow more long-term concerns like Cambodia’s graduation from least developed country (LDC) status.

“Instead of a predictable change in the future, we are now facing an unpredictable change in the present,” he noted.

Minister of Commerce Cham Nimul has urged citizens and the public not to panic over the US’ 49% tariff hike on Cambodian goods, assuring that the government is actively working to address the issue.

In an interview with Cambodian national television on April 3, she emphasised that the tariffs are part of a broader US trade policy aimed at balancing trade with countries worldwide, not solely targeting Cambodia.

“We ask the public to trust the Royal Government and our relevant ministries to protect the interests of our citizens and workers in this privileged industry,” she said.

While Cambodia’s reliance on the US market has declined over the past decade, garments and footwear still account for roughly 10% of GDP, making the country vulnerable to sudden tariff hikes.

However, Thomas also pointed to the EU, Canada and UK as potential growth markets for the Kingdom’s exports.

The Asian Development Bank (ADB) released the Asian Development Outlook (ADO) April 2025 on April 9. Hong Raksmey

“There are other markets for our exports, such as the EU, Canada and UK, that are expected to grow over the coming year and coming years that could increase as recipients of Cambodia's exports,” he explained.

Varma echoed his sentiments, noting that the EU and UK markets will extend, because they are posting higher growth, so demand is expected to strengthen.

She said the exact impact on factories and workers is still unclear, but noted that orders — including from the US — have already been secured, offering some short-term stability.

She added that the government's calm and measured response reinforces that there is no need for panic, a view she fully supports.

Varma noted that the government had recently negotiated several free trade agreements and was in the process of implementing them, while also exploring opportunities in ASEAN markets.

She believed these developments were strong indicators of the country’s resilience to external shocks.

Varma emphasised that the ADB stood fully prepared to support Cambodia in every possible way.

Referring to the partnership strategy launched with the government the previous year, she highlighted those one of its three main pillars focused on promoting shared prosperity through economic diversification led by the private sector.

Varma also pointed out that the ADB prioritised human capital development, mentioning the organisation’s ongoing work in upper secondary education, STEM and skills development, all of which would help boost Cambodia’s resilience.

In addition, she said the ADB has made significant investments across various sectors, including agriculture, water and urban services energy — particularly clean energy — as well as public finance management and service delivery.

She emphasised that Cambodia’s adaptability will play a significant role in mitigating any economic shocks.

The government has been proactive, focusing on diversifying its export markets and enhancing productivity across various sectors.

“We are very confident in Cambodia’s resilience. The government’s mature response, combined with its focus on diversifying exports and increasing productivity, will allow the country to weather this storm,” she said.

The ADB has been a key partner in Cambodia’s development, providing concessional financing and grants for critical projects.

With over $1.2 billion in financing planned over the next three years, including support for gender equality and climate resilience initiatives, Cambodia’s long-term growth remains supported by strong international collaboration.

“We believe in Cambodia's potential and are committed to helping it build resilience in the face of these external shocks,” Varma reiterated.

Furthermore, Cambodia's push towards digital transformation is a crucial element in maintaining its growth trajectory.

The ADB is actively supporting Cambodia in building digital infrastructure to boost productivity across key sectors like agriculture, manufacturing and services.

“Digital infrastructure is not just a tool; it’s a key driver of productivity. Cambodia’s progress in digital payments and the high penetration of smartphones positions the country to leap forward in the digital era,” said Varma. 

Thomas said Cambodia's strong economic performance over the past two decades — averaging 7% annual growth — has been largely driven by rural-to-urban labour migration and significant foreign capital inflows. 

However, as these growth engines approach their limits, the country must now shift toward a new chapter, led by productivity. 

Thomas explained that this transition will require targeted investments in digital infrastructure and innovation, especially as productivity growth has been weak over the past 15 years. 

He stressed that digital transformation, particularly in areas like agriculture, manufacturing and tourism, can drive the next phase of economic development, provided it is led by the private sector and supported by public investment in cross-sectoral digital public goods.

“A lot has changed in the past month, but some things are more relevant than ever,” Thomas said. 

“And that includes our policy challenge for this year: sustaining growth through digital technology,” he added.

In 2024, US-Cambodia trade was estimated at $13 billion, with the US goods trade deficit with Cambodia at $12.3 billion. US exports to Cambodia were $321.6 million, while imports from Cambodia totalled $12.7 billion.