Cambodia Secures Lower US Tariff Than Several ASEAN Competitors
Cambodia has secured a more favourable trade position after the United States imposed a 10 percent tariff on Cambodian goods under its latest Section 301 trade action. The decision, announced by the Office of the United States Trade Representative (USTR) on July 23 (US time), places Cambodia in a lower tariff category than several ASEAN neighbours, including Vietnam, Thailand, Singapore and the Philippines, which will face a 12.5 percent tariff. The move comes after months of consultations between Cambodia and US authorities regarding measures to prevent imports linked to forced labour.
The outcome is being viewed as a positive development for Cambodia’s export sector and investment climate. Government officials and business leaders believe the lower tariff strengthens the Kingdom’s competitiveness for manufacturers and investors looking to establish production facilities that serve the US market. The decision also reflects Cambodia’s efforts to strengthen trade compliance and maintain closer economic cooperation with the United States.
Cambodia’s Compliance Helped Secure the Lower Tariff
The new tariff forms part of the USTR’s Section 301 action targeting 60 economies that Washington determined had not sufficiently prohibited or enforced restrictions on imports associated with forced labour.
When the proposal was first announced on June 6, Cambodia was expected to face a 12.5 percent tariff. The USTR opened a public consultation process that allowed governments, businesses and other stakeholders to submit comments before the July 6 deadline. After reviewing the feedback, the United States lowered Cambodia’s tariff to 10 percent, placing the country alongside Indonesia and Malaysia in the lower tariff group.
According to the White House, Cambodia was recognised as one of the economies that introduced measures prohibiting imports made with forced labour during the consultation period. This commitment was one of the key factors considered when determining the final tariff rate.
Government Welcomes the Outcome
Deputy Prime Minister and First Vice Chairman of the Council for the Development of Cambodia Sun Chanthol welcomed the announcement, describing the result as encouraging for Cambodia’s trade outlook.
“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.
Chanthol explained that Cambodia is still waiting for the outcome of another US Section 301 investigation concerning excess production capacity. He expressed optimism that any additional tariff resulting from that review would remain below 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 became the first country in the world to sign the Agreement on Reciprocal Trade with the United States on October 26 last year.
Cambodia Expands Trade Cooperation With the United States
Minister of Commerce Cham Nimul said Cambodia worked closely with three ministries to introduce additional measures aimed at preventing imports linked to forced labour.
“With that, the ability to maintain the rate below 19 percent is a possibility for Cambodia,” she noted.
Nimul also revealed that Cambodia is negotiating a quota arrangement with the United States alongside Bangladesh, Indonesia and Malaysia. If approved, garment manufacturers would be able to import raw materials from the United States, process them in Cambodia and export finished products back to the US market under quota free and duty free treatment.
She added that discussions are continuing on broader trade cooperation, including opportunities for Cambodian manufacturers to increase the use of American made raw materials in production.
Business Community Sees Strong Investment Potential
Business leaders believe the lower tariff could significantly improve Cambodia’s appeal as a manufacturing and export destination.
Dr Sam Soknoeun, Vice President of the Board of Directors of the Federation of Associations for Small and Medium Enterprises of Cambodia and Chairman of SAM SN Group, described the announcement as an encouraging signal for investors.
“Actually, this is good news for Cambodia,” he said while congratulating the Royal Government for its successful negotiations with US authorities.
According to Soknoeun, international companies seeking to export products to the United States may increasingly consider establishing manufacturing operations in Cambodia because the country now enjoys a tariff advantage over several regional competitors.
He added that greater foreign direct investment would contribute to stronger economic growth, create more employment opportunities, expand industrial production and deepen Cambodia’s integration into regional and global supply chains.
Legal Background Behind the New Tariff
The latest tariff action follows broader changes in US trade policy. Earlier this year, the US Supreme Court ruled against the use of the International Emergency Economic Powers Act as the legal basis for broad reciprocal tariffs, prompting the Trump administration to rely on other legal mechanisms.
As a result, the United States introduced the Cambodia tariff under Section 301 of the Trade Act of 1974, which authorises the USTR to investigate and respond to unfair trade practices through targeted trade measures.
Conclusion
The United States’ decision to impose a 10 percent tariff on Cambodian exports instead of the higher 12.5 percent rate applied to several ASEAN competitors represents a positive development for Cambodia’s trade and investment environment. The decision reflects the country’s efforts to strengthen compliance with international trade standards while reinforcing its position as an attractive manufacturing hub. As negotiations with the United States continue on broader trade arrangements, Cambodia’s lower tariff could provide exporters, investors and manufacturers with new opportunities to expand production and strengthen access to one of the world’s largest consumer markets.