Cambodia Investment Review
A new analytical note from the ASEAN+3 Macroeconomic Research Office (AMRO) has raised concerns over the broader regional impact of the April 2025 U.S. tariff shock, with implications extending to Cambodia despite the country’s relatively muted initial market response. The AMRO report, titled Post-Liberation Day: Tariff Tantrum and Potential Risks beyond the Market Turbulence, outlines how sudden shifts in U.S. trade policy have reverberated across ASEAN+3 markets, exposing vulnerabilities in both financial stability and sectoral performance.
While Cambodia’s equity and currency markets remained stable in the days following the April 2 announcement, AMRO’s data suggests the Kingdom may face indirect risks stemming from regional contagion effects, particularly given its economic integration with more exposed neighbors such as Vietnam, Thailand, and China.
Regional Financial Stress Rises, With Cambodia Caught in the Periphery
According to the AMRO report, U.S. President Donald Trump’s imposition of a blanket 10% import tariff—accompanied by steeper country-specific levies—triggered widespread market disruption. ASEAN+3 markets saw synchronized equity sell-offs, currency depreciation, and bond yield volatility, with the worst impacts recorded in countries with deeper exposure to global trade and U.S. markets.
Cambodia’s stock market dipped just 0.8%, and bond yields remained unchanged. However, AMRO’s Market Stress Index showed that financial market tensions across the region rose sharply. Even though Cambodia is not highly integrated into global capital markets, the Kingdom’s heavy reliance on regional trade partners makes it susceptible to second-order effects.
Exposure Through Trade, Supply Chains, and Sector Vulnerability
The AMRO analysis highlights that sectors deeply embedded in global supply chains—particularly information technology, consumer discretionary, and materials—were among the hardest hit. While Cambodia lacks a large tech sector, it remains heavily dependent on apparel, footwear, and light manufacturing, which are directly tied to regional and global demand.
Notably, Vietnam, Cambodia’s close economic peer and competitor in manufacturing exports, saw its firm-level probability of default rise sharply. AMRO’s sectoral breakdown also warns that similar risks could materialize in Cambodia if trade disruptions persist or intensify.
Learning from 2018: A Wider, Deeper Shock
A comparative section of the AMRO report examines the 2025 tariff event alongside the U.S.–China trade conflict of 2018. Unlike the earlier episode, which was largely contained to China and its immediate trade partners, the 2025 measures had global coverage and triggered broader, more synchronized market stress. Equity markets across ASEAN and Plus-3 countries posted deeper and more sustained declines, while sovereign credit risk—as measured by CDS spreads—also spiked significantly.
Cambodia’s stability during both events suggests a degree of insulation, but AMRO cautions that this could shift quickly, particularly if investor sentiment weakens or foreign direct investment into the region slows. The risk of contagion through trade, supply chains, and financial sentiment remains elevated.
Bond Markets, Liquidity, and Corporate Credit Risks
The AMRO report also points to signs of tightening liquidity in parts of the region. Although Cambodia’s domestic market conditions remain orderly, rising yields in U.S. dollar-denominated Asian bonds—especially in the high-yield space—may signal trouble for corporates reliant on foreign funding. AMRO notes that any prolonged increase in financing costs could increase the risk of defaults, particularly in emerging and frontier economies.
Additionally, the report flags a notable rise in firm-level probability of default in Vietnam and China, with Cambodia showing a small increase. Given the structural similarities between Cambodia and these export-dependent economies, the risks to corporate credit quality could escalate under continued protectionist pressures.
Outlook: Navigating Uncertainty Through Resilience and Regional Cooperation
In its concluding recommendations, AMRO urges policymakers to remain vigilant. The note suggests measures to stabilize financial markets, maintain sufficient liquidity, and support sectors most exposed to global trade disruptions. Regional coordination and clear policy communication are also emphasized as tools to prevent a further deterioration in investor confidence.
For Cambodia, the message is clear: while the initial impact may appear limited, the country’s long-term resilience will depend on its ability to adapt to shifting global trade dynamics and deepen its economic diversification. Enhanced supply chain flexibility, infrastructure investment, and risk monitoring will be essential to navigating what could become an extended period of external volatility.
