Cambodia is entering a crucial period in its trade relationship with the United States as Washington prepares to conclude a separate investigation that could result in another tariff on Cambodian exports. The Royal Government is seeking Most Favoured Nation treatment with zero additional duty, known as MFN+0, to protect the competitiveness of Cambodian products in the US market. The issue is particularly important because the United States is Cambodia’s largest export destination, with more than $7 billion in goods exported there during the first half of 2026. For manufacturers, exporters, investors and business leaders, the outcome could influence production costs, investment decisions, supply chains and Cambodia’s position as a regional manufacturing hub.
The immediate challenge follows the United States Trade Representative’s decision on July 23 to impose a 10 percent tariff under Section 301 after investigating whether economies had taken sufficient action to prevent imports produced with forced labour. Cambodia received the lower 10 percent rate, compared with higher rates faced by several regional competitors. However, a separate investigation into structural excess capacity and manufacturing production is still underway. Its eventual outcome could determine whether Cambodian exporters face another layer of tariffs.
What MFN+0 Would Mean for Cambodian Exporters?
MFN+0 does not mean that Cambodian goods would enter the United States completely duty free. Instead, it would mean that Cambodian products would be subject only to the normal US tariff applicable to their respective product categories, without an additional Section 301 or reciprocal tariff being added on top.
That distinction matters considerably for Cambodian businesses. Additional tariffs raise the cost of selling products in the US, putting pressure on exporters to absorb the expense, accept lower profit margins or increase prices. In highly competitive sectors such as garments, footwear and travel goods, even a relatively small difference in tariff treatment can influence where international buyers place orders and where manufacturers choose to establish production.
The US Cambodia Agreement on Reciprocal Trade, or ART, provides a framework for tariff treatment. Under the agreement, Washington committed to maintain an additional reciprocal tariff of no more than 19 percent on Cambodian originating goods, while certain products would receive zero percent reciprocal tariff treatment.
For Cambodia, therefore, the objective is not simply to obtain a headline tariff reduction. It is to create a more predictable trading environment that gives exporters and international investors greater confidence when planning production, sourcing and long term investment.
A New US Investigation Creates Another Layer of Uncertainty
The major concern now is a separate Section 301 investigation launched in March covering 16 economies, including Cambodia, China, Indonesia, Malaysia, Thailand and Vietnam. The USTR is examining whether government acts, policies and practices relating to excess capacity are unreasonable or discriminatory and whether they burden or restrict US commerce.
Cambodia’s manufacturing sector will need to demonstrate that its growth is primarily driven by market demand, international buyers and foreign investment rather than state supported overproduction. A negative finding could result in additional measures that increase costs for Cambodian exporters and potentially weaken the Kingdom’s advantage over competing manufacturing destinations.
The consequences could extend beyond existing exporters. If the United States imposes a higher tariff burden on Cambodia than on competing countries, multinational manufacturers could reconsider future investment plans. Companies deciding where to establish factories often compare labour costs, logistics, market access and tariff exposure together, meaning tariff policy can become an important factor in investment decisions.
Sihanoukville Autonomous Port and other logistics infrastructure will therefore remain strategically important as Cambodia works to protect its export competitiveness and attract investment into manufacturing and supply chain activities.
Cambodia Currently Holds an Important Regional Tariff Advantage
PaΓ±Γ±ΔsΔstra University of Cambodia Faculty of Social Sciences and International Relations Dean Kevin Nauen told Khmer Times that Cambodia already occupies a relatively favourable position compared with several neighbouring manufacturing economies.
Responding to whether Cambodia could realistically secure an economy wide MFN+0 arrangement, Nauen said, “Realistically, not economy-wide.”
He explained that Cambodia currently has the best available tier, with a flat 10 percent Section 301 add-on, compared with 12.5 percent for Vietnam and Thailand.
“The closest thing to MFN+0 percent is the pending textile tariff-rate quota (TRQ) for garments made with US cotton or fabric. Cambodia is one of only four countries eligible, but it is unimplemented, and the USTR’s own framework keeps an add-on layer for nearly everyone,” Nauen said.
The existing tariff advantage is meaningful, but it should not be viewed as a permanent guarantee. Cambodia’s exporters are benefiting from a lower rate than some major regional competitors, yet the unresolved excess capacity investigation means the broader trade environment remains uncertain.
Cambodia Needs to Show That Its Manufacturing Growth Is Market Driven
Nauen said Cambodia should concentrate its efforts on addressing the concerns raised by the excess capacity investigation rather than taking a confrontational approach toward Washington.
He identified three important distinctions Cambodia could present to US policymakers. First, Cambodia’s labour intensive garment and footwear assembly is fundamentally different from capital intensive and heavily subsidised sectors such as steel, solar and electric vehicles. Second, Cambodia’s manufacturing expansion is largely driven by demand from Western brands rather than unused, subsidised industrial capacity. Third, stronger enforcement of rules of origin, cooperation on duty evasion and sourcing from US inputs can demonstrate that Cambodia is actively addressing concerns about transhipment.
“This constructive-engagement posture over confrontation should be taken, given Cambodia has limited room to oppose outright,” the PUC Dean noted.
For Cambodian policymakers, the message is therefore clear. Maintaining access to the US market will require not only diplomatic negotiation but also evidence that Cambodia’s manufacturing and export model is transparent, commercially driven and compliant with international trade requirements.
The ART Provides Some Leverage, but Not a Complete Solution
Nauen described the Agreement on Reciprocal Trade as providing Cambodia with some leverage, although its influence is limited.
Asked whether the ART gives Cambodia additional negotiating power, he said, “Modestly, and indirectly.”
He noted that the agreement’s 19 percent US tariff ceiling lost much of its relevance after the US Supreme Court struck down the IEEPA. However, he pointed to Cambodia’s commitments on forced labour, transhipment and state owned enterprises as factors that helped the country obtain the lower 10 percent rate and TRQ eligibility under the new Section 301 framework.
Cambodia’s current tariff advantage is therefore useful, but it does not eliminate the structural challenges facing the economy. Nauen described the advantage as “meaningfully positive right now, but not decisive”.
Cambodia recorded strong export growth in the first half of 2026, with exports reaching around $7.5 billion, up more than 30 percent year on year. However, concerns over dependence on Chinese inputs, factory scale, and future European Union Everything But Arms and least developed country graduation risks mean Cambodia cannot rely on a single tariff advantage indefinitely.
“Tariffs are a tailwind factor going forward but not the structural differentiator,” the PUC Dean added.
About Half of Cambodia’s Exports Depend on the US Market
For logistics and export businesses, the stakes are particularly high because of Cambodia’s concentration in the US market.
Logistics Supply Chain and Brokers Business Association in Cambodia President Chea Chandara said the current 10 percent tariff has not significantly affected Cambodian exporters, especially because several countries in the region face tariffs of up to 15 percent.
“Additionally, low labour costs allow investors to generate good returns,” he said.
However, he stressed the strategic importance of the US market, noting that approximately half of Cambodia’s exports are destined for the United States.
“Cambodia exports to many markets around the world, but about half of our goods go to the US, so this market is very important. If we fail to secure favourable tariff treatment, it would be a major concern,” he said.
This level of dependence makes the outcome of the US tariff discussions particularly important for Cambodian manufacturers, logistics providers, exporters and businesses supporting international supply chains.
Regional Markets Cannot Yet Fully Replace US Demand
Cambodia has been working to expand trade with neighbouring countries, but those markets are not yet large enough to compensate for a major disruption in US exports.
Chandara said, “Trade with neighbouring countries is still limited and at an early stage. We have seen some trade between Cambodia and China through the Laos route, but it is still at the starting point.”
“Trade with Vietnam has stronger potential, as Vietnam buys significant amounts of raw agricultural materials from Cambodia for processing and re-export,” he said.
The comments highlight an important issue for Cambodia’s long term economic strategy. Export diversification can reduce exposure to a single market, but developing alternative destinations requires time, stronger logistics networks, market access agreements and greater domestic production capacity.
For now, maintaining favourable access to the US remains critical while Cambodia continues expanding its relationships with other trading partners.
Exporters Want Lower Tariffs and Stronger Domestic Value Creation
From the perspective of Cambodian exporters, the preference is not merely to preserve the existing 10 percent rate but to achieve an even more favourable arrangement.
“From the exporters’ perspective, we would actually like the tariff to be below the current 10 percent. If the US imposes an additional tariff, it would be a major concern,” Chandara said.
He also warned that tariff changes could affect foreign investment, particularly Chinese investment designed to serve the US market.
“If the investment targets local or regional markets, the impact would be limited. But if it targets exports to the US market, then it would be affected,” he said.
Chandara encouraged Cambodia to strengthen cooperation with Washington by increasing the use of US raw materials.
“The US wants Cambodia to import its raw materials, process them and export the finished products back to the US with duty-free treatment,” he said.
At the same time, he argued that Cambodia needs to move beyond simple assembly. “Simply importing raw materials from other countries and assembling them in Cambodia will not strengthen our economic resilience. We need to increase our capacity to process raw materials and create more value domestically,” he said.
This could become increasingly important as Cambodia competes for higher quality foreign direct investment. Developing more domestic processing capacity would allow local businesses to capture a larger share of the value created by international supply chains rather than relying primarily on low cost assembly.
US Trade Deficit Could Complicate Cambodia’s Negotiations
Securing MFN+0 will not be straightforward because the United States has a substantial goods trade deficit with Cambodia. Washington’s broader trade policy is increasingly focused on reducing trade imbalances, expanding US exports and strengthening domestic manufacturing.
This means Cambodia’s negotiating position will depend not only on the importance of its exports to the US but also on what it can offer in return.
Greater purchases of US goods and raw materials, stronger supply chain cooperation, better enforcement against trade and customs violations, and continued compliance with US requirements could all become important components of Cambodia’s discussions with Washington.
The strategic challenge is to demonstrate that favourable tariff treatment for Cambodia can also contribute to US economic interests rather than simply lowering costs for Cambodian exporters.
Businesses Also Have a Role in Protecting Market Access
Government negotiations alone cannot determine Cambodia’s long term trade position. Cambodian companies will also need to ensure that their supply chains are transparent and compliant with international trade requirements.
Federation of Associations for Small and Medium Enterprises of Cambodia Vice President and SAM SN Group Chairman Dr Sam Soknoeun said securing MFN+0 is important because the US is a strategic destination for Cambodian exports and a major contributor to economic growth.
“Securing MFN+0 would also attract more foreign direct investment (FDI) into industries and production facilities in the Kingdom. It would encourage more purchase orders from the US for garments, footwear and travel goods, further increasing their share of Cambodia’s overall trade,” he said.
Dr Soknoeun said Cambodia’s exports to the US exceeded $7 billion in the first half of 2026, representing growth of nearly 30 percent compared with the previous year. He also noted that MFN+0 would cover 154 types of Cambodian goods and could encourage companies, including Chinese manufacturers facing difficulties exporting directly to the US, to invest in Cambodia.
For businesses, this creates both an opportunity and a responsibility. Companies that maintain transparent sourcing, comply with rules of origin and avoid questionable suppliers can help protect Cambodia’s reputation and reduce the risk of future trade penalties.
Cambodia Could Use US Inputs as Part of Its Negotiating Strategy
Dr Soknoeun identified Cambodia’s decision to reduce import duties to zero percent on a range of US products as one of the Kingdom’s stronger negotiating points.
He also pointed to the US commitment to maintain Cambodia’s export competitiveness by keeping its tariff below those faced by neighbouring countries such as Thailand and Vietnam.
“The US does not focus on producing garments, footwear and travel goods and needs to import these products from Cambodia. Cambodia also has a competitive labour force, which provides an important basis for the Royal Government’s negotiations,” he said.
On forced labour and excess capacity concerns, Dr Soknoeun said the Royal Government has established an inter ministerial working group to address the issues and ensure compliance with US rules and regulations.
“The fact that the US imposed a 10 percent tariff on Cambodian goods under Section 301, compared with 12 to 15 percent on other countries, shows that Cambodia has made significant efforts,” he said.
He also encouraged Cambodian businesses to consider sourcing inputs such as cotton and fabric from the United States, processing them in Cambodia and exporting finished products back to the US where they can benefit from favourable tariff treatment.
MFN+0 Could Influence Cambodia’s Next Wave of Investment
The tariff question goes beyond the interests of existing exporters. It could influence where future factories are built, which industries attract foreign investment and how international companies design their regional supply chains.
For Cambodia, favourable US market access can make the country more attractive to manufacturers seeking competitive labour costs and an alternative production base in Southeast Asia. But investors increasingly assess more than labour costs. They also consider tariff exposure, logistics, rules of origin, supply chain transparency, infrastructure, product quality and political and regulatory predictability.
That means Cambodia’s competitiveness cannot depend solely on achieving MFN+0. Even if the government succeeds in securing more favourable tariff treatment, businesses will still need to reduce logistics and production costs, improve productivity, strengthen quality standards and increase domestic value creation.
So, Can Cambodia Secure MFN+0?
Cambodia has several factors working in its favour, including its current 10 percent tariff position, strong US demand for garments, footwear and travel goods, competitive labour costs, growing exports and a willingness to cooperate with Washington on trade compliance.
However, securing an economy wide MFN+0 arrangement remains uncertain. The pending excess capacity investigation, the US trade deficit with Cambodia, Cambodia’s dependence on the US market and Washington’s broader push to strengthen domestic manufacturing all create significant negotiating challenges.
The more realistic path may be for Cambodia to protect and expand its existing tariff advantage while pursuing targeted zero tariff opportunities, including eligible textile tariff rate quota arrangements. At the same time, the government can strengthen its case by demonstrating that Cambodia’s manufacturing growth is market driven, improving supply chain transparency, increasing US input sourcing and maintaining close compliance with US trade requirements.
What the Outcome Means for Businesses and Investors
For Cambodian exporters, the immediate priority is predictability. A stable tariff environment makes it easier to negotiate orders, plan production and calculate margins. For investors, favourable US market access can influence whether Cambodia remains an attractive production base compared with Vietnam, Thailand and other regional destinations.
For policymakers, however, the larger task is to build an economy that remains competitive even when tariff conditions change. Diversifying export markets, developing higher value manufacturing, improving logistics, strengthening local supply chains and increasing domestic processing capacity will be essential.
The coming months could therefore become a defining period for Cambodia’s trade strategy. MFN+0 would provide a significant boost to exporters and could support further investment, but the country’s long term competitiveness will ultimately depend on much more than tariffs.
Conclusion
Cambodia has a strong reason to pursue MFN+0, but achieving it across the economy is far from guaranteed. The Kingdom currently enjoys a comparatively favourable 10 percent US tariff position, yet the pending excess capacity investigation could introduce new risks. With the US absorbing roughly half of Cambodia’s exports, maintaining favourable access is essential for manufacturers, exporters, investors and the wider economy.
The strongest strategy is likely to combine constructive engagement with Washington, strict trade compliance, greater use of US inputs, stronger domestic value creation and broader export diversification. If Cambodia can demonstrate that its manufacturing sector is commercially driven, transparent and mutually beneficial to both economies, it will strengthen its case for continued favourable treatment.
For Cambodia’s business community, the message is clear: MFN+0 could provide an important competitive advantage, but building a resilient and globally competitive economy requires Cambodia to prepare for a future in which tariff advantages alone are no longer enough.
