Cambodia’s Role in the US-China Trade Rebalancing

As global supply chains continue to recalibrate in response to the ongoing economic tensions between the United States and China, Southeast Asia has emerged as a key region for trade realignment. Among the nations gaining traction in this geopolitical and economic shift is Cambodia — a country once overlooked in the global trade hierarchy but now seen as a strategic partner in the reshaping of manufacturing and export routes. Cambodia’s rising role in the US-China trade rebalancing presents both opportunities and responsibilities for its government, private sector, and international partners.

The Background: US-China Trade Friction and Its Global Effects

Since the onset of the US-China trade war in 2018, tariffs on hundreds of billions of dollars’ worth of goods have shifted trade flows across the globe. American companies and buyers, aiming to reduce their dependence on Chinese manufacturing, have turned to “China Plus One” strategies — relocating or supplementing their production bases to other low-cost, export-friendly nations.

Countries like Vietnam, Malaysia, India, and Indonesia have captured much of the media attention. However, Cambodia has steadily risen as a practical and increasingly popular destination for US-bound manufacturing diversification.

Why Cambodia? Key Advantages for Trade Diversification

1. Preferential Trade Agreements

Cambodia benefits from various trade privileges with Western countries, including:

• The Generalized System of Preferences (GSP) with the United States (though partially suspended in some areas).

• Everything But Arms (EBA) initiative with the European Union, which provides duty-free, quota-free access for all products except arms and ammunition.

🔗 EBA – European Commission

These trade advantages make Cambodia an attractive sourcing hub for US importers seeking tariff relief from Chinese-origin products.

2. Strategic Geographic Location

Cambodia’s proximity to both China and key ASEAN neighbors allows companies to reroute their supply chains with relative ease. For example, components made in southern China can be sent to Cambodia for final assembly, thereby qualifying for non-Chinese origin status under certain trade rules.

🔗 Cambodia in Global Value Chains – World Bank

3. Low Labor Costs and Growing Workforce

Labor costs in Cambodia remain lower than in China, Vietnam, and Thailand, making it attractive for labor-intensive industries such as:

• Garments and textiles

• Footwear

• Light electronics

• Furniture and wood products

The garment sector alone employs over 800,000 workers, many of whom are engaged in export-bound production, especially for the US and EU markets.

🔗 International Labour Organization: Cambodia Garment Industry

Cambodia’s Export Shift: Trade with the US is Growing

Despite a relatively small export base, Cambodia has been steadily increasing its shipments to the United States:

• In 2022, Cambodia exported over $9 billion worth of goods to the U.S., according to U.S. Census Bureau trade data.

• Garments, travel goods, and footwear accounted for the lion’s share of these exports.

• There’s also a rise in bicycle exports and light electronics, signaling a shift toward diversified manufacturing.

🔗 U.S. Census Bureau – Cambodia Trade Statistics

This increase demonstrates how Cambodia is benefiting from trade rebalancing as U.S. companies search for low-cost alternatives to China.

Challenges Cambodia Must Overcome

While Cambodia’s trajectory is promising, several barriers still hinder its full integration into post-China supply chains.

1. Infrastructure Limitations

Cambodia’s logistics and port infrastructure, though improving, remains behind regional competitors. Key issues include:

• Limited deep-sea port capacity (Sihanoukville Port is currently the primary maritime gateway)

• Poor road connectivity with inland industrial zones

• High electricity and logistics costs compared to Vietnam or Thailand

🔗 World Bank – Cambodia Logistics Performance Index

2. Regulatory and Bureaucratic Hurdles

• Business registration and customs procedures still suffer from inefficiencies and corruption.

• Intellectual property protection remains weak.

• Digitalization and automation in trade processing are in early stages compared to neighbors.

🔗 Transparency International Cambodia – Corruption Perceptions Index

3. Over-Reliance on Few Sectors

The Cambodian economy remains heavily dependent on textiles and garments, making it vulnerable to external shocks. Diversifying into electronics, automotive parts, and digital services will be essential for long-term stability.

Efforts Toward Modernization

The Cambodian government is making strategic moves to improve its competitiveness:

• National Logistics Master Plan and Transport Infrastructure Development Plan aim to enhance multimodal connectivity.

• Special Economic Zones (SEZs) are being upgraded to attract high-value investors.

• Digital trade facilitation tools such as the Cambodia National Single Window (CNSW) are being expanded.

🔗 Ministry of Commerce Cambodia – CNSW

Additionally, Cambodia is part of the Regional Comprehensive Economic Partnership (RCEP), which connects the country to China, Japan, South Korea, Australia, and other ASEAN countries under one of the world’s largest free trade frameworks.

🔗 ASEAN Secretariat – RCEP Overview

The Way Forward: How Cambodian Businesses Can Seize the Moment

For Cambodian exporters, manufacturers, and service providers, the US-China trade rebalancing is not just a macroeconomic trend — it’s a direct opportunity to:

• Attract FDI from Western and East Asian companies

• Build capacity in supply chain management and digital trade

• Expand into new sectors, including semiconductors, green tech, and digital services

To do this, local businesses must upgrade quality standards, adopt lean manufacturing, and work closely with trade facilitation agents, such as:

🔗 Cambodia-Agent.com – your partner for sourcing, compliance, and export success in Cambodia.

Conclusion

As global companies continue diversifying away from China, Cambodia is emerging as a key secondary hub in this new trade architecture. With its low-cost manufacturing, favorable trade agreements, and growing government reforms, Cambodia is poised to deepen its role in the rebalancing of trade between the US and Asia.

However, to sustain and scale this momentum, the country must invest in infrastructure, diversify its export base, and simplify bureaucratic processes. If these conditions are met, Cambodia may not only benefit from the trade rebalancing — it could become a regional export powerhouse in its own right.