Even as regional economies brace for potential damage from mounting US protectionism, Cambodia is projected to see a small boost to its GDP growth thanks to US tax reforms, Cambodian delegates to a regional economic meeting said on Friday.
The 21st Asean+3 Finance Ministers’ and Central Bank Governors’ Meeting, held at the Asian Development Bank’s (ADB) annual meeting in Manila, discussed global and regional economic challenges, including fears of a US-led “trade war”, according to participants.
Cambodian Finance Ministry Secretary of State Vongsey Vissoth, who attended the meeting alongside National Bank of Cambodia Governor Chea Chanto, said the meeting raised concerns around the US’s rising protectionist rhetoric, which precipitated in tense negotiations between officials of the US and China in Beijing last week.
“The protectionism of the US is a trade war. It will cause a huge impact to Asean+3 as the majority of countries conduct big trade with the US,” Vissoth said.
“It could impact financial stability in the region,” he said, adding that Asean+3 was looking for strategies to mitigate the risks.
Beyond imposing tariffs and other barriers to trade – the US raised tariffs on steel and aluminium imports in March – US tax reforms are encouraging American corporations to repatriate profits, altering global capital flows.
Nevertheless, the International Monetary Fund (IMF) assessed Cambodia as being likely to be spared the initial damage from any trade war, at least in its first round, Vissoth said.
The US market accounts for 22 percent of Cambodian exports, 80 percent of which is garments. But garments have not been targeted by trade barriers so far.
“The IMF just made an evaluation of Cambodia in the meeting, that US tax reforms will benefit Cambodia, projecting a half percentage point increase to GDP growth in the coming year,” he said. Tax cuts for American firms were expected to lead to an increase in their purchases from Cambodia, he added.
But Stephen Groff, ADB’s vice president for East Asia, Southeast Asia and the Pacific, said it was too soon to say what impact US-Chinese trade tensions could ultimately have.
“Trade restrictions between China and the US have not yet been put in place. They are still under discussion and negotiation,” Groff said.
Note: The Asian Development Bank funded travel and lodging expenses associated with this story. They had no influence in the reporting or editing process.