The Asian Development Bank ( ADB ) has found “reassuring evidence” that the impact of the United States’ 19% tariff on Cambodian goods will be innocuous.

“Cambodia has secured a relatively favourable tariff through negotiation, and the expected net impact of that 19% tariff is near zero,” ADB says in a policy brief prepared with the Cambodia Development Research Institute.

“This net-zero effect arises because the negative effect of global tariffs on US demand offsets the positive effect of Cambodia’s favourable rate relative to its regional competitors."

The bank identifies Bangladesh, China, India, and Vietnam as “key competitors’ to Cambodia” – whose clothing, leather, and footwear sectors account for about half the country’s exports to the US. Electrical machinery and electronics account for a further 25%.

According to the ADB, Cambodia’s four competitors faced an unweighted average tariff of around 24% as of August.

Ceasefire deal

The 19% rate for Cambodia was announced by US President Donald Trump in July as part of a ceasefire deal between Cambodia and Thailand after five days of heavy fighting along the two countries’ border. Trump granted Thailand the same rate.

“The analysis provides reassuring evidence of the 19% tariff’s innocuity,” the ADB brief says.

Given the volatile global trade policy environment, however, it warns that “small adjustments in the relative tariffs across competing export-oriented economies would leave Cambodia vulnerable.

"For instance, the previously announced 36% US tariff on Cambodian imports ( which remains relevant, as it is close to the rate the US imposes on transshipped goods ) would have a non-recessionary impact of around 1% of GDP.

"Although the GDP impact would be relatively small because the sectors that are most heavily affected ( garments and electronic assembly ) are low value-added, microdata show that the shock would have serious socioeconomic consequences through increased unemployment."

Big impact on the poor

The upshot would be a “disproportionately large” impact on poor people, with manufacturing workers living near the poverty line falling below it as they lose jobs or shift to lower-income employment, increasing poverty by 8%.

“This displacement of over 100,000 workers would come at a challenging time, as the government works to assist returning migrants from Thailand,” the bank says.

Although many are reported to have since returned to Thailand, almost 900,000 Cambodians were estimated to have fled home as of September.

The ADB notes that Cambodia’s exports to the US are about 33% of its total exports and worth 25% of gross domestic product ( GDP ) in a typical year, although a relatively low share of exports are value-added to the local economy.

A study of the garment sector suggests that roughly 25% of its exports are domestic value-added, largely through labour.

Even under a high-tariff scenario of 36%, the ADB suggests Cambodia would be able to divert at least half of its exports to non-US markets.

Under the 19% scenario, Cambodian consumption is forecast to rise 0.05% next year, with employment climbing 0.16% and overall output rising 0.01%.

Vulnerable sectors

The biggest negative impact is expected to be in the garments, footwear and travel goods sector where output is forecast to fall 0.13%.

Output is also projected to decline in machinery and electronics ( down 0.10% ) and agriculture ( down 0.06% ).

But other sectors are forecast to expand, notably accommodation and food services ( 1.20% ), followed by trade ( 0.11% ) and agro-processing ( 0.03% ).