Cambodia’s Six-Month Outlook Amid Trade Barriers and Regional Tensions

At the July 2025 International Business Chamber (IBC) Forum, industry leaders presented a cautiously optimistic six-month outlook for Cambodia’s economy. Strong growth in the first half of 2025, fueled by a 22% year on year increase in merchandise exports and robust consumer activity, positioned Cambodia’s GDP growth at around 5%, surpassing some projections. However, the forum’s experts emphasized emerging risks, notably from external trade barriers and regional tensions, which could dampen momentum in the latter half of the year. Trade with the United States, which accounts for nearly 40% of Cambodia’s exports, is particularly vulnerable due to ongoing U.S. tariff measures, particularly on travel goods, as well as uncertainty from geopolitical issues like the recent border dispute with Thailand. Despite these challenges, Cambodia is diversifying its trade through new market access initiatives, including agreements with China, South Korea, and the UK, alongside regional partnerships such as the Regional Comprehensive Economic Partnership (RCEP). These measures aim to mitigate the impact of tariff measures, with Cambodia’s key export sectors, including garment manufacturing and agriculture, expected to maintain growth despite external pressures. For U.S. stakeholders, this outlook presents both opportunities and risks, as Cambodia seeks to balance trade vulnerabilities with new agreements and market diversification strategies. 
 

The IBC Forum also highlighted Cambodia's near-term economic outlook, which presents both opportunities and challenges. The country’s thriving garment industry, which is integral to its export sector, remains a primary area of interest. Despite the 19% U.S. tariff on Cambodian goods, the sector's resilience, bolstered by Cambodia's strategic trade agreements and investments in infrastructure, positions it well for continued exports to the U.S. and other markets. Further, the tourism sector, although still recovering from pandemic era lows, has shown strong growth, with a notable increase in international arrivals and new investments in hospitality. Notable is also Cambodia’s energy and infrastructure sector, which sees projects including new energy investments, renewable energy facilities, and the Techo International Airport, set to open in late 2025, promise to boost both domestic productivity and international connectivity. These initiatives align with Cambodia’s long-term development goals, and are expected to create significant opportunities for foreign investors particularly in manufacturing, energy, and logistics. The government’s commitment to improving the investment climate is evident in the surge of foreign direct investment (FDI), with $5.8 billion approved in the first half of 2025 alone. This growth reflects investor confidence, bolstered by Cambodia’s strategic trade agreements and pro-business reforms. At the same time, the new Monitoring & Evaluation (M&E) framework for economic reforms, aimed at formalizing the informal economy - around 88% of Cambodia’s workforce - signals Cambodia’s commitment to transparency and sustainable development, adding a layer of stability and predictability to the business environment. For U.S. stakeholders, Cambodia’s infrastructure upgrades, coupled with its stable political environment and ongoing regulatory improvements, provide a promising landscape for investment. However, continued monitoring of geopolitical risks, including regional trade frictions and the evolving tariff landscape, will be critical to maintaining Cambodia’s economic resilience.