The recent US-Cambodia tariff agreement has reshaped the trade landscape, but contrary to predictions of manufacturing exodus, Cambodia’s industrial sector continues to demonstrate remarkable resilience. With the US tariff rate now set at 19% effective August 2025, international manufacturers are discovering that Cambodia and broader ASEAN remain highly competitive destinations for production facilities.
The Tariff Reality: From Uncertainty to Stability
After months of trade negotiations and initial tariff threats reaching 49%, the United States and Cambodia concluded a bilateral agreement establishing a unified 19% tariff rate on Cambodian exports to the US, effective August 1, 2025. This represents a strategic compromise that provides much-needed stability for manufacturers operating in Cambodia.
The negotiated rate places Cambodia competitively within the ASEAN bloc, alongside Indonesia, Malaysia, the Philippines, and Thailand, all subject to the same 19% tariff. Meanwhile, Vietnam faces a 20% rate, while Myanmar and Laos contend with significantly higher 40% tariffs.
Export Performance Defies Headwinds
Despite tariff concerns, Cambodia’s export sector has demonstrated exceptional growth in 2025. The country exported products worth $5.5 billion to the United States in the first six months of 2025, representing a remarkable 25.6% increase compared to the same period in 2024.
This surge in exports occurred even amid tariff uncertainty, proving that Cambodia’s manufacturing advantages extend far beyond tariff considerations. The garment sector, machinery manufacturing, and electronics assembly continue to drive export growth, with total exports across all markets reaching $22.39 billion in the first nine months of 2025.
Why Manufacturing Stays: The Cost Competitiveness Factor
Industry experts and trade associations have been clear: manufacturing operations will not return to the United States despite tariff pressures. The American Apparel & Footwear Association emphasized that Cambodian factories remain “absolutely not” coming back to the US, even with tariff adjustments.
Labor Cost Advantages
Cambodia’s competitive edge begins with labor costs. The 2025 minimum wage for garment, textile, footwear, and travel goods workers stands at $208 per month for regular employees and $206 for probationary workers. When including attendance bonuses ($10 per month) and seniority benefits ($2 to $11 based on tenure), total compensation packages remain highly competitive globally.
These wage rates represent a fraction of manufacturing labor costs in developed markets, creating a cost differential that far exceeds the 19% tariff impact. For labor-intensive industries, this wage advantage alone justifies continued operations in Cambodia despite tariff considerations.
Production Ecosystem and Supply Chain Integration
Cambodia has developed robust manufacturing clusters, particularly in garments, footwear, electronics components, and bicycle parts. The country’s position within ASEAN supply chains provides manufacturers access to regional inputs, raw materials, and logistics networks that would be impossible to replicate elsewhere.
The manufacturing ecosystem includes:
- Established supplier networks for textiles, components, and packaging
- Port infrastructure connecting to major shipping routes
- Industrial zones with reliable utilities and transportation
- Workforce experienced in export-oriented manufacturing
- Proximity to regional markets in Asia-Pacific
Investment Momentum Continues
Far from deterring investment, Cambodia attracted fixed-asset investment approvals totaling $7.8 billion in the first nine months of 2025, marking a 47% year-on-year increase. This dramatic surge demonstrates that international manufacturers and investors view Cambodia’s long-term competitiveness favorably, even accounting for tariff adjustments.
The Cambodian government’s proactive approach to trade relations, including reciprocal tariff reductions on 19 American product categories from 35% to 5%, signals commitment to maintaining open trade channels and supporting export industries.
Broader ASEAN Competitiveness
Cambodia’s resilience reflects broader ASEAN manufacturing strength. Regional economies continue attracting investment in labor-intensive industries due to fundamental cost advantages that tariffs cannot eliminate. The competitive workforce across Southeast Asia, combined with improving infrastructure and business environments, ensures the region remains the global manufacturing hub for numerous industries.
Trade policy experts note that even with tariff adjustments, the cost-competitiveness of ASEAN’s workforce keeps investment flowing into the region. Manufacturing decisions are based on total landed costs, production capabilities, quality standards, and supply chain efficiency—factors where Cambodia and ASEAN maintain significant advantages.
Economic Outlook and Strategic Considerations
While Cambodia’s economic growth forecast has moderated to 4.8% in 2025 (down from 6% in 2024) due to external headwinds including trade policy uncertainty, the economy demonstrates continued resilience. Manufacturing output remains strong, and export growth continues despite global challenges.
For businesses considering Cambodia market entry or manufacturing relocation, the current environment presents strategic opportunities:
Tariff Stability
The negotiated 19% rate provides predictability for financial planning and investment decisions, eliminating the uncertainty that characterized early 2025.
Competitive Regional Positioning
Cambodia’s tariff rate matches or beats most ASEAN competitors, ensuring a level playing field within the region while maintaining cost advantages over other global manufacturing locations.
Infrastructure Investment
The Cambodian government’s 2025 budget of $9.32 billion includes significant allocations for infrastructure development, energy projects, and industrial support, signaling continued commitment to manufacturing sector growth.
Market Access
Cambodia maintains preferential trade agreements with numerous markets beyond the US, including the EU (under Everything But Arms), China (through RCEP), and other trading partners, providing diversified export opportunities.
Rules of Origin and Compliance
Manufacturers in Cambodia must ensure compliance with rules of origin requirements to qualify for the negotiated tariff rates. Working with experienced legal and logistics partners helps navigate certification requirements, documentation standards, and customs procedures.
The importance of proper origin documentation has increased in the current trade environment, making compliance expertise a critical factor in successful Cambodia operations.
Conclusion: The Competitive Advantage Endures
The US-Cambodia tariff agreement demonstrates that trade relationships are evolving, but the fundamental economics supporting Cambodia’s manufacturing sector remain intact. With competitive labor costs, established supply chains, strong export growth, and continued investment inflows, Cambodia and broader ASEAN retain their position as globally competitive manufacturing destinations.
For businesses evaluating manufacturing locations, the tariff environment represents just one variable among many. Cambodia’s total value proposition—combining cost efficiency, workforce availability, improving infrastructure, government support, and regional integration—continues to attract manufacturers across industries.
Rather than driving manufacturing away, the tariff resolution provides clarity and stability that enables more confident long-term planning for companies committed to Cambodia operations.
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