A garment factory in Phnom Penh, Cambodia.
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Among the top goals for President Trump and his administration in hitting trading partners with steep tariffs is bringing manufacturing capacity back to the U.S., even if it comes at the price of short-term market and economic duress. But in Cambodia, the Asian country hit with the highest tariff rate of any in the new trade plan, that goal is highly unlikely.
While the 49% tariff rate that the Trump administration is placing on Cambodian goods will lead to an existential crisis for Cambodian factories and workers already at the low-end of global income distribution, reshoring of its manufacturing to the U.S. is not going to happen, according to a trade group that represents U.S. interests in the retail manufacturing hub.
“They’re absolutely not going to go back to the United States,” said Casey Barnett, president of the American Chamber of Commerce in Cambodia, the trade association representing U.S. companies manufacturing in Cambodia. “I can’t imagine that Americans want to sit down and sew a pair of sweatpants for long hours of the day,” Barnett said.
Barnett said manufacturers in Cambodia are looking at other countries to mitigate the tariffs, but the U.S. is not among the options. Some companies are looking to move their supply chains to Egypt, sub-Saharan Africa, India, and Indonesia. Other companies are moving more slowly, thinking there might be a reversal on the tariffs.
Factories in Cambodia are by no means in a good position for the moment, according to Barnett, looking for ways to survive for the next few months.
“The labor-intensive garment factories here in Cambodia simply cannot continue to operate with a 49% additional tariff. They can’t survive and are looking for alternatives,” he said.
For now, at least, no new orders are being placed. “There are orders being paused. Everyone’s facing uncertainty and they want to wait a bit to see how the dust settles,” Barnett added.
The Cambodian government is working on a number of steps to mitigate the pressure, such as fiscal policies, including tax credits.
Under Armour, Rawlings Sporting Goods, Lululemon, Black & Decker, Hugo Boss, Hearth & Home, Eddie Bauer, Dollar General, Diageo, Asics, Adidas, and Bass Pro Shops are among the retail companies that import from Cambodia to North America. There is an ever wider list of items imported from garments to footwear, travel goods, bicycles, agriculture products, furniture, solar panels, tires, and kitchen cabinets.
Expect a pause in executive decision making
Andrei Quinn-Barabanov, supply chain industry practice lead at Moody’s, says that even if companies manufacture as cheaply as possible, relocating supply chains is a major investment.
“Supply chain investments are meant to be longer term and when you have tremendous uncertainty like this you are unlikely to make these decisions. Companies will wait to see what the tariff response will be from other countries, as well as nontariff restrictions they will put on U.S. companies. You will have very little executive decision making.”
The White House has claimed that Cambodia’s tariffs on the U.S. reach as high as 97%, a claim disputed by the country, as well as by multiple sources of tariffs data, including the World Trade Organization. The Observatory of Economic Complexity, which also studies trade data, says some consumer products such as snacks, cosmetics, and automobiles can see much higher tariffs than the average, as high as 35%, in Cambodia. The U.S. average tariff on Cambodian goods is 2.6%.
The administration has continued to argue that the return of manufacturing to the U.S. will ultimately lead to greater revenue for the U.S. “If we’re successful, tariffs would be a melting ice cube in a way,” Treasury Secretary Scott Bessent said on CNBC on Tuesday. “Because you’re taking in the revenues as the manufacturing facilities are built in the U.S. and there should be some level of symmetry between the taxes we begin taking in with the new industry from the payroll taxes as the tariffs decline.”
Andre C. Winters, founder and principal of supply chain consultancy and planning company, HudsonWinters, recently told CNBC he is doubtful that companies will bring manufacturing back to the U.S. in a hurry. “This trade war is not an incentive to come back to the United States,” said Winters. “Companies will look to other countries that are being hit with lower tariffs. If I’m paying 40% in Vietnam and I can get 20% tariff in another country, I’ll go there, because in the end, it is still cheaper than coming back to America.”
Barnett said the U.S. consumer will be footing at least part of the bill, as many companies have warned.
“Unfortunately, it’s going to push up the prices for the American consumer,” he said. “Cambodia’s been helping American families buy those back-to-school clothes at an affordable price. These tariffs are simply going to raise prices for American families and not bring manufacturing back to the U.S.”
Bringing manufacturing back to the United States is not the only reason for the Trump tariffs plan, according to President Trump and his trade advisers, with reducing the nation’s trade deficit and debt also critical to their strategy, and that has become clear as nations begin to offer tariff concessions.
Cambodia’s prime minister sent a letter to the Trump administration in recent days outlining significant reductions in tariff rates for U.S. goods. Vietnam offered to take tariffs on U.S. imports to 0%, an offer that Trump noted, but that the Trump administration later indicated would not be enough for the administration to lift its new levies.
Trade deficits and “nontariff cheating” are as important, said White House trade advisor Peter Navarro on Monday in a CNBC interview, in rejecting the premise of the Vietnamese offer.
In a comparison of trade deficits, Cambodia ranks low on the list compared to many international manufacturing nations. U.S. goods trade with Cambodia totaled an estimated $13 billion in 2024, according to the USTR. U.S. goods exports to Cambodia in 2024 were $321.6 million, up 4.9 percent ($14.9 million) from 2023. U.S. goods imported from Cambodia totaled $12.7 billion in 2024, up 9.3 percent ($1.1 billion) from 2023. The U.S. goods trade deficit with Cambodia was $12.3 billion in 2024 and is not in the top ten of trade deficits.
Largest trade deficits with U.S., by nation
(in $billions, as of Dec. 2024)
China (-295.4)Mexico (-171.8)Vietnam (-123.5)Ireland (-86.7)Germany (-84.8)Taiwan (-73.9)Japan (-68.5)Korea, South (-66)Canada (-63.3)India (-45.7)
Source: U.S. Census Bureau
Many economists have pointed to the risks tied to hitting some of the poorest nations in the world with high tariffs. Cambodia is among the 11 nations that account for a small part of the U.S. trade deficit but have exports to the U.S. representing over 10% of their GDP, according to the Center for Global Development. “For people working in the apparel industry, the conditions are harsh, but the wages these jobs offer represent a real opportunity, particularly for women,” it noted.
Barnett echoed those fears, saying the tariff rates which will only increase poverty in Cambodia, lead to the loss of jobs, and further widen the trade deficit.
“There’s a bit of a panic and that’s tragic because there are one million of the world’s poorest people currently employed in this industry here in Cambodia, and many of them are women trying to make ends meet. Their monthly salary is around $300,” Barnett said. “Cambodia is between a rock and a hard place.”
