Commerce ministry spokesperson Pen Sovicheat (left) and TAFTAC deputy secretary-general address the May 26 Cambodia Economic Forum. Kampuchea Thmey
Next month, the second round of negotiations regarding the Trump administration’s 49% “reciprocal” tariffs on Cambodian goods will resume. Although the US appeared to have calculated the tariff rate based on the trade deficit, the origin of goods was likely a decisive factor.
On May 10, Sun Chanthol, first vice-president of the Council for the Development of Cambodia (CDC) and head of the working group on trade and investment coordination between Cambodia and the US, noted that the main topics that would be discussed included expanding the volume of US imports to the Kingdom and managing the origin of Cambodian goods, many of which the US claims originate from China.
Regarding the origin of goods, Pen Sovicheat, spokesperson for the Ministry of Commerce, stated that goods produced in Cambodia have sufficient added value to be considered Cambodian products, even if the raw materials are sourced from other countries.
At the May 26 Cambodia Economic Forum, themed “Cambodia’s Economy in the Context of US Reciprocal Tariffs,” organised by the Kampuchea Thmey media outlet, Sovicheat explained that there are two types of rules of origin: wholly obtained, meaning all goods are produced using entirely domestic raw materials, and value-added or sufficient working process, which applies to goods like those in Cambodia’s garment industry exported to the US.
These are considered Cambodian products because they utilise Cambodian labour, even if raw materials are imported.
He added that the principle of sufficient value-added is applied by the EU and the UK to Cambodian goods and falls under the ASEAN cumulation principle, which considers goods as domestic if they use raw materials from ASEAN countries and are fully produced with local labour.
Recently, US trade officials determined that some companies importing solar panels from Cambodia engaged in price dumping in the US market, while receiving subsidies from the Chinese government. As the result the US imposed tariffs on certain Cambodia-based solar companies as high as more than 3,500%. The US International Trade Commission will decide on this matter in June.
“I want to clarify that it is true that while most Chinese companies have state-owned shares, they compete in the market, just like other companies. Similarly, Cambodia’s commerce ministry state-owned shares in companies like Green Trade, which deals in rice. Despite this, it operates on an equal footing with private companies, experiencing both losses and profits,” Sovicheat clarified.
The impact of countervailing duties
Last week, Prime Minister Hun Manet expressed optimism that the upcoming tariff negotiations would succeed and result in lower tariffs.
Kaing Monika, deputy secretary-general of the Textile, Apparel, Footwear and Travel Goods Association in Cambodia (TAFTAC), explained at the forum that well-known Cambodian apparel products are manufactured under contracts with major global brands like Nike, Adidas or Lee Y. The 49% tariff will impact both producers and US consumers.
“If this tariff is implemented, it affects both sides — producing countries like us and end consumers. Tariffs increase the final market price of products. If prices rise, it affects us as a producing country, making us less attractive. Even if buyers continue purchasing from us and we bear some of the tariff burden, the market price will still increase, and the final burden fall on American consumers. If brands find cheaper alternative producing countries, they will shift elsewhere,” he said.
When asked about diversifying markets beyond the US, Monika said it depends on brand owners’ decisions to target growing markets or those with growth potential in the next one to two years.
Sovicheat noted that market diversification can be achieved through bilateral or multilateral free trade agreements, such as RCEP, and by expanding the domestic market.
As the US scrutinises raw material imports from China, this presents an opportunity for Cambodia to expand domestic raw material production to meet demand. Using local raw materials benefits Cambodia, eases US pressure and strengthens compliance systems, according to Monika.
