The increasing trade rivalry between the US and China is having an effect on nations in the Asia-Pacific region, including Cambodia. This will become more critical with the return of Donald Trump to the US presidency, as it is anticipated that his policies will heighten trade disputes. If Trump pursues a stance against China again, Cambodia, a modest yet strategically positioned economy, must weigh its choices thoughtfully to effectively manage any challenges.

China is currently a major investor and key development ally for Cambodia; however, the US also plays a role, as a significant market and backer of democratic governance in the Kingdom. To ensure Cambodia’s economic progress and political stability is safeguarded, it is important to handle trade tensions carefully. 

The tensions between the US and China during Trump’s previous presidency were characterised by increased tariffs and restrictions on technology transfer, as efforts were made to reduce economic interdependence between the two countries – a period marked by significant strain in their bilateral relations. Although the Biden administration has carried forward some of these policies from the administration’s approach to China relations, there is a possibility that Trump’s return to power could lead to a renewal of trade conflicts and the implementation of measures aimed at curbing China’s economic influence. These escalating tensions are anticipated to have effects on nations like Cambodia that have economic connections with both the US and China. 

Important economic connections

China’s Impact; For some time now, China has been investing in Cambodia’s infrastructure and related sectors such as agriculture and real estate development. This investment has greatly changed places like Sihanoukville into business centres and made China the biggest provider of foreign direct investment (FDI). Moreover, projects like the Belt and Road Initiative (BRI) are expected to bring about enhancements in connectivity and trade routes. 

The US plays a major role as a market for Cambodia’s garment industry and textile exports – industries that play a crucial part in Cambodia’s economy and job market. 

In the face of trade tensions escalating during Trump’s presidency Cambodia could face several scenarios.

There is a growing expectation that due to Trump’s foreign policy concerning China in areas such as trade and regional security matters, Cambodia may need to navigate carefully by possibly reducing Chinese investments or limiting partnerships with Chinese tech companies in order to maintain good relations with the US. Balancing these demands without offending either country calls for diplomatic skill and tact. 

Due to its dependence on China’s economy, Cambodia faces some risks that could leave it vulnerable to potential consequences, such as trade restrictions or sanctions imposed by the US on countries with significant Chinese investments. 

Rising tensions may include an increase in economic diversification opportunities, as other nations look for investment alternatives outside of China due to reasons like tariffs or supply chain issues. This may lead them to promote Cambodia as a manufacturing centre for companies shifting their operations from China. 

Tactics for manoeuvring through trade rivalries

Being part of ASEAN gives Cambodia the opportunity to benefit from collaborating with neighbouring countries to counter outside influences more effectively. It may do so by endorsing ASEANs role in regional security and economic collaboration towards a more extensive network that promotes impartiality and non-alignment amid the US-China competition.

Cambodia should aim to expand its partnerships to lessen its dependence on China by seeking trade deals with countries like Japan and South Korea, as well as the EU. By joining the Regional Comprehensive Economic Partnership (RCEP), Cambodia has opened up avenues for trade relationships and investment beyond interests. 

Investment in Cambodia’s industries and infrastructure is key to enhancing the country’s resilience against influences and pressures. By fostering a self-reliant economy supported by local sectors, the Kingdom can decrease its dependence on any one partner. Efforts to enhance skills, provide training and promote technological innovation in local businesses will not only attract a variety of investments but also help mitigate the impact of trade disruptions.

Building stronger connections with both superpowers

In managing ties with the US and China, Cambodia should aim to bolster interactions that promote collaboration on priorities without forming overly strong alliances with either party. For instance, Cambodia could collaborate with China on infrastructure and growth initiatives while also working towards trade deals or security alliances with the US that honour Cambodia’s independence and autonomy. 

Cambodia’s historical strategy of non-alignment could be beneficial in this situation by promoting a stance that highlights the significance of both the US and China as allies through a “peaceful coexistence” perspective. This non-alignment tactic could act as a safeguard by positioning Cambodia as a mediator between the two nations, rather than taking sides in their competition. 

In light of escalating trade tensions between the US and China and the uncertainties surrounding a Trump presidency, Cambodia’s decisions about its economy and trade policies need to strike a careful balance between the challenges and opportunities presented by these developments. 

To stay resilient amidst the competition between the great powers, Cambodia should focus on strengthening its connections within ASEAN, diversifying its economy and maintaining a policy of neutrality. By adopting an adaptable strategy Cambodia can continue its growth trajectory, protect its sovereignty and secure its interests in an evolving landscape defined by the rivalry between the US and China. By adopting this rounded strategy, Cambodia can maintain its position as an ally while asserting its independence within the changing regional context. 

Seun Sam is a policy analyst at the Royal Academy of Cambodia. The views expressed are his own.