Cambodia will step up trade talks with the U.S. ahead of an August 1 deadline, when a 36% tariff is set to hit all its exports, according to Deputy Prime Minister Sun Chanthol, who said Phnom Penh still has “cards to play” during a press conference on Tuesday.
Cambodia had been staring down a 49% levy after Trump expanded global tariffs on April 2. A 90-day pause followed, during which Cambodian and U.S. trade officials held several rounds of talks.
The rate was later cut to 36% after Trump sent letters to foreign leaders, including Prime Minister Hun Manet, confirming the new terms on Tuesday.
While Cambodian officials appear confident that they can strike a new deal, analysts point out that diplomacy alone will not be enough – economic interests, market access and geopolitics will drive the outcome. Some also question how hard Cambodia’s GDP could be hit if the levy sticks.
After the White House sent form letters to 14 countries outlining the new “reciprocal” tariffs, it left the door open, saying deals could still be struck with nations that “continue to negotiate.”
“We’ll explain that we need a lower rate – we’re still a poor country and haven’t yet graduated from LDC [Least Developed Countries] status,” Chanthol said at a press conference at the Council for the Development of Cambodia, where he serves as first vice president. “We will graduate in 2029.”
He called on Washington to “give us a chance to escape poverty by 2029,” while noting Cambodia still has “cards to play” in the talks, though he declined to disclose any details.
Chanthol also urged companies operating in the country to stay calm and trust the government, saying steps had been taken to protect investors and workers.
The looming tariff episode has already rattled Cambodia’s garment and footwear sector, which employs nearly one million workers, makes up more than a third of GDP, and counts the U.S. as its top export market.
Commenting on the likelihood of further tariff reductions, Cambodian-American political analyst and Arizona State University professor Sophal Ear said it is possible, but unlikely without major shifts.
Vietnam secured a 20% rate for most exports, now the region’s lowest, by aligning more closely with U.S. interests, he said, while Cambodia remains hampered by close ties to Beijing, concerns over transshipment, and its role as a hub for scam operations.
Ear said any short-term breakthrough would likely require Phnom Penh to offer real concessions – on labor standards, trade imbalances and IP rights – and show it is ready to align with U.S. priorities.
“Will Cambodia volunteer itself as a third country to take in deported individuals like South Sudan?” he said, suggesting that gestures seen as advancing American interests could work in Phnom Penh’s favor. A deal, he added, might shift Cambodia toward a more balanced foreign policy, though China’s deep investment means any fallout would likely be limited.
Looking beyond diplomacy, economic experts say Cambodia must also adapt its broader trade strategy and economic fundamentals.
Stephen Higgins, managing partner at Phnom Penh-based Mekong Strategic Capital, said if the 36% tariff holds, the government needs to shift focus toward investors selling products to markets outside the U.S., which account for 75% of global GDP.
“The Royal Government of Cambodia needs to drive productivity, keep investing in infrastructure and education, and make a whole-of-government effort to push scam centers out of the country,” he said.
Still, Higgins remains cautiously optimistic despite the tariff’s apparent severity.
Cambodia’s exports to the U.S. represent about 26% of GDP in gross terms, but the actual value-added contribution is closer to 8%, he explained.
“Even under a pessimistic scenario – losing 50% of that market over three years and redirecting only 20% elsewhere – the GDP hit would be just 0.8% per year,” Higgins said. “With indirect effects, it might reach 1% annually. Not ideal, but Cambodia would still rank among the fastest-growing economies globally.”
He noted the garment sector is the most vulnerable but questioned where factories could realistically relocate, given that competing markets face similar tariffs and labor shortages.
“We expect a sharp slowdown in the second half of 2025, driven by front-loaded orders, buyer caution, and consumer pushback on higher prices,” he said. “But over the long term, people still need to buy clothes. Some less productive factories may close – but if we’re serious about boosting productivity, which is key to reducing poverty, shedding weak performers might not be a bad thing.”
