Trump trade war endangers diversified companies to China

Trump trade war endangers diversified companies to China

for Tim HSU, who mainly sells modern lamps and ceiling lights to American customers, the historical announcement of US President Donald Trump has messed up his carefully planned projects.

planned investments in Cambodia

Last year the Taiwanese entrepreneur decided to invest in Cambodia in order to diversify his production base beyond his traditional mainstay in southern China. As a precaution, he wanted to protect himself against the risk of possible higher tariffs on goods from China during Trump's second term.

unexpected customs increase

The announcement on Wednesday that an unexpectedly high customs will be raised to all US imports from Cambodia-the highest in Asia and the second highest worldwide-has changed everything. "If customs of 49% remain unchanged, we withdraw our investments from Cambodia," HSU told CNN.

At the moment, his next step is uncertain, since the questions about the duration of the high tariffs are still in the room.

The effects on Cambodia's business

The withdrawal from Cambodia would be relatively easy for HSU because the investment is still in an early phase. But for many other companies with long -established factories that create thousands of jobs in the country - one of the poorest in Asia - the news about the tariffs are devastating.

In the course of more than 15 years, numerous countries in Southeast Asia and South Asia, including Laos, Vietnam, Myanmar and Sri Lanka, benefited from global investors who were looking for alternative supply chains to China's efficient but increasingly expensive production. The tensions between the USA and China and the Covid 19 pandemic in recent years have accelerated this trend. Labor -intensive industries, from clothing to shoes to electronics, have become an important engine for the economic growth of these countries.

The effects on the textile industry

Cambodia, a center of clothing production, will be most affected by the tariffs, according to Ahmed Albayrak, a research employee at the Lowy Institute, since the United States accepts a large part of its clothing and shoes exports. Despite the impressive growth in the past decade, Cambodia is still one of the poorest nations of Asia. With around 17 million people, the country has still been in the healing process of its turbulent history, including a secret US bomb campaign during the Vietnam War and the genocide of the Red Khmer, which was brutal in 1979.

Under their rule, at least 1.7 million people were killed by executions, illnesses, hunger and revision. The aftermath of this trauma can be felt to this day.

economic uncertainties

Today, the Cambodian economy is dominated by agriculture, tourism and especially industry, not least because the workers are cheap there. According to CNN calculations, over 37% of Cambodia's exports are eliminated to the United States, which the country makes particularly susceptible to US tariffs. The clothing and shoes exports made up 43% of the country's foreign sales last year.

The numerous workers in the clothing industry, many of them live with a minimum wage of $ 200 a month, face the greatest challenges. According to the United Nations development program, around one million people were employed in the clothing, textile and shoe industry last year, with about 75% of these workers being women.

international brands and their production

Great international brands such as Nike and Adidas are increasingly moving their production lines to Southeast Asia to reduce the dependence on China, which is in a geopolitical conflict with the United States. "The negative effects of these tariffs on the entire economy will be enormous," warned Albayrak and referred to production declines and job losses.

Trump justifies his global tariffs with the aim of bringing jobs back in his own country. But according to Casey Barnett, President of the Camed Business School in Phnom Penh, Cambodia is an example of why this goal is unreachable. "The exports of Cambodia to the United States include socks, shorts, jeans, T-shirts, sports shoes and clothing. It is simply impossible to establish labor-intensive and low-qualified productions in the United States, which is why this will have no influence on the return of jobs," he said.

hopes for negotiations

Cambodia's economy is based on exports to the United States, which make up 27% of gross domestic product and have brought millions of people out of poverty. "It would be really tragic to lose this and suddenly see hundreds of thousands of young women unemployed, not to have no way to support their families and be pushed into poverty," said Barnett. For the moment, the investors in Cambodia hope that they can survive the storm of the customs increase and count on possible negotiations between Phnom Penh and Washington to reduce tariffs, according to Kevin Chang, founder of Stronghold Trustee.

Immediately after Trump's customs threat, Chang received numerous calls from his clients. Nevertheless, he follows a waiting approach: "I don't think it will be final. I am confident that there will be a solution for the benefit of everyone."

The focus on China

Some experts believe that the high tariffs to these countries in Southeast Asia and South Asia reflect Trump's wider objectives to attack Chinese exporters who shift their production abroad. Others, such as Laos with 48%, Vietnam with 46%and Myanmar with 44%, are also severely affected by tariffs. Cambodia gets almost half of his foreign investments from China and US politics seems to be targeting China's market strategy about third countries.

According to Edwin Lai, a professor of economics at the Hong Kong University of Science and Technology, the major trade deficits between these countries and the USA are signs that Chinese investments are diverted to these countries. The United States is aware of this and want to use these tariffs to put pressure on the countries, to limit Chinese investments.

The imposition of such high tariffs worldwide could isolate the United States, while China emerges as a guide in global trade. "The rest of the world will try to practice free trade and I can see that China has the motivation to be a leader," concluded Lai.

Report by CNNS Hassan Tayir, Chris Lau and Rhea Mogul.