Executive Summary

The White House has announced a new 36% tariff on Cambodian exports, effective 1 August 2025, as part of a sweeping trade policy realignment targeting 14 countries. Additionally, goods transshipped through Cambodian territory—whether originating elsewhere or routed via Cambodia—will be subject to a 40% tariff rate. These developments significantly impact Cambodia’s garment and textile sector, which remains central to the nation’s economy and a key export contributor to the U.S. market.

Key Tariff Measures

Sector Impacts

• Price Competitiveness Pressure: Cambodian manufacturers face steep challenges retaining U.S. buyers under the higher tariff regime. Apparel and textile margins will likely compress significantly.

• Transshipment Compliance Risk: Firms utilizing regional value chains or re-export arrangements must reassess exposure. The 40% rate on transshipped goods compounds complexity and cost.

• Shift in Buyer Behavior: Brands may look toward Vietnam (20% tariff rate under a bilateral deal), Bangladesh, or African nations for more favourable sourcing terms.

• Risk to Cambodia-Based FDI: The garment sector’s attractiveness for foreign investment may decline if investors fear long-term unpredictability in U.S. trade policy.

Regional Tariff Comparison

Cambodia’s garment exporters now face one of the highest U.S. tariff rates in Southeast Asia, raising competitiveness concerns relative to neighbouring markets.

Vietnam’s ability to secure a preferential rate of 20%—down from a proposed 46%—offers U.S. buyers a lower-cost alternative for many of the same product lines exported from Cambodia.

Regulatory Compliance Focus

• Companies should prepare for increased enforcement scrutiny on origin labelling and customs documentation to ensure differentiation between Cambodian-made and transshipped goods.
• We advise monitoring U.S. Customs and Border Protection (CBP) guidance and engaging with Cambodian customs on best practices for verifying country-of-origin status under the new tariff structure.

Recommended Action Steps

(1) Conduct Tariff Exposure Audits across product categories destined for the U.S.

(2) Revisit Transshipment and Routing Protocols to prevent misclassification or penalty exposure.

(3) Explore Relocation and Market Diversification, including within ASEAN and the EU, to hedge export risk.

(4) Engage With U.S. Trade Counsel and Local Authorities for representation and updates on diplomatic negotiations.

(5) Reassess Contracts and Pricing Structures to reflect revised cost assumptions and preserve commercial viability.

Our Firm’s Advisory

Our customs practice group is working closely with Cambodian garment manufacturers, export managers, and multinational buyers to provide tariff risk assessments, strategy briefings, and advocacy guidance. Please reach out for tailored support as this policy unfolds.

Tax services required to be undertaken by a licensed tax agent in Cambodia are provided by Mekong Tax Services Co., Ltd, a member of DFDL and licensed as a Cambodian tax agent under license number – TA201701018.