Cambodia factories ‘absolutely not’ coming back to US
A garment factory in Phnom Penh, Cambodia.
Bloomberg | Bloomberg | Getty Images
President Donald Trump’s administration is focused on imposing steep tariffs on trading partners to bring back manufacturing capacity to the U.S. However, in Cambodia, which faces the highest tariff rate under the new trade plan, the goal of reshoring manufacturing to the U.S. seems unlikely.
Despite the 49% tariff rate on Cambodian goods, the American Chamber of Commerce in Cambodia believes that manufacturers will not shift operations back to the U.S. Instead, they are exploring alternative countries like Egypt, sub-Saharan Africa, India, and Indonesia to mitigate the impact of the tariffs.
With factories in Cambodia struggling to survive under the additional tariff burden, there is a pause in new orders as businesses assess the situation and look for ways to cope.
Companies such as Under Armour, Lululemon, and Adidas import goods from Cambodia to North America, but the new tariffs are expected to affect prices for American consumers.
Impact on Executive Decision Making
Amidst the uncertainty created by the tariffs, companies are hesitant to make significant supply chain investments. The focus is on waiting to see how other countries respond to the tariffs before making any major decisions.
While the Trump administration aims to boost U.S. manufacturing through tariffs, experts are skeptical that companies will rush to bring production back to the U.S. due to the ongoing trade war.
As Cambodia and other nations offer tariff concessions to the U.S., the broader goals of reducing trade deficits and enabling tax cuts come into play in the Trump administration’s trade strategy.
Trade data shows that Cambodia’s trade deficit with the U.S. is not among the largest, with many other countries having higher deficits. The Trump administration’s approach of burden sharing through tariffs has raised concerns about its impact on developing nations like Cambodia.
Experts warn that the high tariffs on Cambodian exports could lead to job losses, increased poverty, and a widening trade deficit. The apparel industry, which employs a significant number of Cambodians, is particularly vulnerable to the new tariffs.
With over $1 billion worth of goods already imported from Cambodia to the U.S. this year, the new tariffs pose a threat to Cambodia’s economy and workforce.
The challenges posed by the tariffs have created a sense of panic in Cambodia, with fears of increased poverty and job losses looming over the country’s garment industry.
