As Trump's trade war with China brings reciprocal tariffs, many Chinese firms are investing in operations elsewhere to avoid the burden. Anna Corden reports from Cambodia.

Phnom Penh

Donald Trump has signed an order to impose tariffs imports into the U.S. from countries including China, Mexico and Canada.

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Chinese-owned factories have increasingly relocated to Cambodia as a means to circumvent tariffs imposed by the United States amidst the ongoing trade war with China. The relocation trend has been highlighted in an economic zone near Phnom Penh, where signage in Khmer and Chinese languages signals the Chinese investment surge. A manager at a local furniture factory, which moved from China a month prior, confirmed that their production in Cambodia is primarily aimed at exporting products to the United States, neutralizing the impact of the tariffs.

Prior to the trade tensions initiated by President Trump, Cambodian exports to the US stood at around $3 billion. This figure surged to over $12 billion last year, now constituting nearly 30% of Cambodia's GDP. The Cambodian government has reported that over half of the nation's factories are now Chinese-owned. While Chinese firms avoid US tariffs, economists affirm that these activities comply with international trade regulations. Concerns remain, however, over the potential economic repercussions for Cambodia if the country were to face retaliatory tariffs due to its growing ties with Chinese manufacturers.

Mr. Huang, a Chinese garment factory owner, relocated his operations to Cambodia two decades ago, attracted by tax benefits and lower wages. In response to the 2018 trade war, he shifted all his manufacturing to Cambodia and now exports 60% of his products to American retailers such as Walmart and Costco. The increase in these orders coincides with newly imposed US tariffs on Chinese goods.



Chinese-owned factories move to Cambodia to avoid U.S. tariffs

A two-hour drive outside the Cambodian capital Phnom Penh, a convoy of semi-trailers passed by. Let's drive straight through. Moments later, an enormous arch greeted us with signage in two languages. The local language Khmer and beneath, Chinese. But it's very clear who is in charge of this special economic zone rising from the dirt. Hello, sir. Hello. The manager of this furniture factory invited us in. OK. OK. Thank you. They moved here from China a month ago to produce Ottomans to export to the United States. Most of the companies coming here are Chinese. Yes. And they're driving incentive to avoid US tariffs. The US-China trade war is the main reason for this explosion of Chinese investment in Cambodia. In 2016, before President Trump took office, Cambodian exports to the US were roughly $3 billion. Last year, they topped $12 billion, representing nearly 30 per cent of the country's GDP. The Cambodian government says more than half of the factories in Cambodia are Chinese-owned. To America. While Chinese companies are skirting US tariffs, economists we spoke to say they are playing by the rules. But there are fears Cambodia's economy could become collateral damage. Are you concerned that President Trump might put tariffs on Cambodia considering the Chinese investments? Yes, of course. Chinese garment factory owner Mr Huang moved to Cambodia 20 years ago, capitalising on tax breaks and lower wages while still running factories in China. But when the trade war began in 2018, he moved all operations to Cambodia and now exports 60 per cent of his garments to the US. And who are your customers? He's a Walmart, Costco. And he said those orders have only multiplied since President Trump announced new tariffs.

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