Cambodia Faces Steepest Trump-Era Tariff Yet: Trade Group Says U.S. Manufacturing Shift Remains Off the Table

In a move that has rattled Southeast Asia’s manufacturing landscape, Cambodia has been hit with the highest tariff rate in President Donald Trump’s latest trade policy — a staggering 49% levy on its goods exported to the United States. Yet, despite the economic shockwaves reverberating through Cambodian factories, American manufacturers are unlikely to reclaim that production, according to industry insiders.

The tariff, part of Trump’s revived strategy to reduce the U.S. trade deficit and promote domestic industry, disproportionately affects Cambodia — a country whose overall trade surplus with the U.S. is modest in comparison to larger export nations such as China, Vietnam, and Mexico.

“Absolutely not coming back”

Speaking to CNBC, Casey Barnett, President of the American Chamber of Commerce in Cambodia, made it clear: “Manufacturing is absolutely not going to go back to the United States.” Barnett emphasized the economic reality — American workers are not poised to replace Cambodian labor in stitching garments or assembling goods. “I can’t imagine Americans lining up to sew sweatpants for eight hours a day,” he said.

With factory floors across Phnom Penh scrambling for alternatives, many manufacturers are exploring other nations — from Egypt and India to Indonesia and sub-Saharan Africa — to reroute their supply chains. The U.S., notably, is not on that list.

Factories in distress

Cambodia’s labor-intensive garment sector, which employs over a million workers — many of them women earning around $300 per month — is now facing a crisis. “These factories cannot survive a 49% tariff,” Barnett warned. “Orders are paused, and there’s a general wait-and-see approach as companies hold off on making long-term decisions.”

Cambodia’s government, in response, is considering fiscal measures and tax incentives to help factories weather the blow. However, trade experts believe the damage may already be done.

American brands caught in the crossfire

Major U.S. brands like Under Armour, Hugo Boss, Dollar General, Eddie Bauer, and Lululemon depend heavily on Cambodian manufacturing for apparel, travel goods, and furniture. Customs records show a wide array of goods flowing from Cambodian factories — from bicycles and solar panels to kitchen cabinets and sportswear.

While the administration insists these tariffs are a stepping stone toward reshoring jobs, experts disagree. “This trade war is not a manufacturing magnet,” said Andre Winters of HudsonWinters, a supply chain consultancy. “Businesses will simply look to nations with less punitive tariffs. Even a 20% levy in another country is cheaper than manufacturing in the U.S.”

Tariff wall or consumer tax?

As factories struggle, the ripple effects may soon hit the American consumer. “These tariffs will increase prices for back-to-school clothes, footwear, and home essentials,” Barnett said. “Ultimately, it’s U.S. families who’ll feel the pinch at checkout counters.”

Treasury Secretary Scott Bessent defended the policy, arguing that the tariffs would eventually fund domestic job growth and tax cuts. “In the short-term, yes, tariffs bring in revenue,” he said in a televised interview. “But our long-term goal is to build U.S. industry and reduce dependency on foreign labor.”

Global reaction and U.S. trade gaps

Cambodia has already appealed for tariff relief, offering substantial concessions. Vietnam, in a separate move, proposed dropping all tariffs on U.S. imports — a deal dismissed by the Trump administration as insufficient.

Though Cambodia’s trade volume with the U.S. reached nearly $13 billion in 2024, its deficit pales in comparison to America’s largest trade imbalances. For example, the U.S. trade deficit with China last year exceeded $295 billion, followed by Mexico and Vietnam.

Despite its relatively small trade footprint, Cambodia’s dependence on U.S. demand is immense. According to research firm Datawheel, U.S. consumers account for over one-third of Cambodia’s exports, and a 49% tariff could potentially erase $4.56 billion in exports over four years.

Knitwear alone faces losses nearing $548 million, jeopardizing the livelihoods of thousands of factory workers. “It’s a humanitarian issue as much as an economic one,” Barnett stressed. “We’re talking about some of the world’s poorest workers — and they’re the ones paying the price.”

A long road ahead

While the Trump administration frames the tariff blitz as a strategy for economic revival, many economists and trade experts argue that poorer nations are bearing disproportionate costs. Cambodia’s apparel sector, a backbone of its economy and a critical source of women’s employment, now faces an uncertain future.

“We are caught between a rock and a hard place,” Barnett said somberly. “Jobs will be lost, poverty will rise, and still, manufacturing will not return to the U.S.”

As the world watches the next chapter of America’s trade policy unfold, Cambodia’s factories stand as a stark reminder of the complex global web that powers the modern economy — and the human cost of unraveling it.