Avoiding Trump’s tariffs, some Chinese language corporations relocate to Cambodia’s “Particular Financial Zone”

Phnom Penh, Cambodia — A convoy of semi-trucks handed by as our CBS Information crew drove about two hours south of Cambodia’s capital, Phnom Penh. Moments later we have been greeted by an unlimited arch with signage in two languages — the native Khmer and, beneath it, Chinese language.

There may very well be no mistake about who’s in control of the “Particular Financial Zone” rising from the filth. We approached a furnishings manufacturing unit, the place the Chinese language supervisor invited us in to shoot some video.

The manufacturing facility, which makes ottomans, moved to Cambodia from China a couple of month in the past.

We requested the supervisor about his neighbors within the financial zone and he stated many of the corporations shifting in are Chinese language. A driving incentive behind the relocation of these manufacturing operations is avoiding U.S. tariffs on Chinese language items, and there are a whole lot of corporations selecting to make the funding. 

The size of the economic park rising within the south of Cambodia is tough to fathom. Building goes on for miles.

The U.S.-China commerce struggle is the principle motive for the explosion of Chinese language funding within the comparatively small nation about 600 miles away from mainland China.

In 2016, earlier than President Trump took workplace for his first time period, Cambodian exports to the U.S. have been price roughly $3 billion per yr. Final yr they topped $13 billion, representing practically 30% of the nation’s GDP.

The Cambodian authorities says greater than half of the factories within the nation at the moment are Chinese language-owned — a complete funding price about $9 billion.

“It’s a technique of avoiding U.S. tariffs,” Casey Barnett, president of the American Chamber of Commerce in Cambodia, instructed CBS Information.

Whereas the Chinese language corporations working in Cambodia are skirting U.S. tariffs, they’re technically enjoying by the foundations. However because the Trump administration places China firmly in its financial crosshairs, there are issues in Cambodia that the nation’s personal financial system might maintain collateral injury.

“They’re completely depending on exports to the U.S., and will grow to be a goal — a susceptible goal,” Barnett stated.

For garment manufacturing unit proprietor Mr. Huang, that might be devastating. He readily admitted to worrying concerning the prospect of President Trump concentrating on items like his — Chinese language, however made in Cambodia — with new tariffs.

No newcomer, Huang arrange store in Cambodia 20 years in the past, capitalizing on the tax breaks and decrease wages within the nation, whereas nonetheless working factories in China. However when the commerce struggle started in 2018, he moved all operations to Cambodia.

He instructed CBS Information that 60% of his enterprise is within the U.S. market, together with his items going to acquainted retailers together with Walmart and Costco.

Huang stated incoming orders had multiplied since Mr. Trump introduced his new tariffs on China, the most recent spherical of which might take impact on Tuesday.

An escalating U.S.-China commerce struggle

Mr. Trump imposed a ten% blanket tariff on Chinese language imports in early February, drawing retaliatory measures by China of 15% on imported U.S. coal and liquified pure fuel, together with a ten% tariff on crude oil, agricultural equipment and a few automobiles. Final week, Mr. Trump threatened China with one other 10% responsibility on all imports, which might take impact Tuesday, leading to a complete 20% blanket tariff on all Chinse items imported to the U.S.

Mr. Trump has imposed the tariffs on China, he says, for Beijing’s failure to stem the movement of lethal fentanyl into the U.S.

Already, Beijing is planning extra countermeasures.

“China is finding out and formulating related countermeasures in response to the U.S. menace of imposing a further 10% tariff on Chinese language merchandise beneath the pretext of fentanyl,” the World Instances newspaper, largely thought-about a mouthpiece for the ruling Communist Social gathering, reported on Monday, citing an nameless supply.

“The countermeasures will probably embody each tariffs and a collection of non-tariff measures, and U.S. agricultural and meals merchandise will most probably be listed,” the newspaper stated.

CBS Information has reached out to the White Home for remark and can replace with any response.

Until and till the escalating commerce struggle sees Mr. Trump flip his favored financial weapon of tariffs on Cambodia, Huang instructed CBS Information extra Chinese language corporations will probably grow to be his neighbors within the nation.

“After all,” the businessman stated. “Many individuals inform me they want manufacturing unit constructing, want to maneuver instantly, as a result of they suppose taxes are going up.”

He believes the commerce struggle is certain to escalate, and he is satisfied that Cambodia and different Southeast Asian nations are the long run for Chinese language producers.