A truck is seen transporting a container near the entrance of the Phnom Penh Autonomous Port on April 3, 2025, in an image credited to Tang Chhin Sothy/AFP/Getty Images.
For Tim Hsu, a seller of modern lamps and ceiling lights primarily to American clients, the recent tariff announcement by US President Donald Trump poses a significant challenge to his business plans. Hsu, a Taiwanese entrepreneur, had chosen to expand his production to Cambodia last year to mitigate risks associated with potential higher tariffs on Chinese products during Trump's second term. However, the unexpectedly high tariffs imposed on all US imports from Cambodia have forced him to reconsider his investment decision. Hsu expressed concerns about withdrawing his investment if the 49% tariff remains unchanged.
The impact of this levy has raised uncertainties about the future course of action for many businesses, including Hsu's, as they assess the implications of the steep tariffs. While Hsu can easily reconsider his investment due to the early stage of his venture in Cambodia, for numerous companies with well-established factories providing employment to thousands of workers in the economically challenged nation, the tariff news is distressing.
Southeast Asian and South Asian nations like Laos, Vietnam, Myanmar, and Sri Lanka are also grappling with the repercussions of tariffs exceeding 40%, which could severely disrupt their export-dependent economies. These countries had been attracting global investors seeking alternatives to China's rising production costs. The escalating US-China tensions and the Covid-19 pandemic have further accelerated this shift, with labor-intensive industries emerging as essential drivers of economic growth for these nations.
Cambodia, known for its garment production, is likely to be the most severely impacted in Southeast Asia due to its substantial export volume of apparel and footwear to the US. Approximately 37% of its exports are directed towards the US market, making it particularly susceptible to US tariffs. Apparel and footwear constitute a significant portion of Cambodia's exports, accounting for over 43% of the total exports in the previous year.