Cambodia Is a Growing Footwear Production Hub — A Trade Deal Could Be on the Way
Thailand and Cambodia on Monday said they agreed to an 'immediate and unconditional ceasefire' to halt their border fight. And Trump's taking some of the credit for that.
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Trump and and European Commission President Ursula von der Leyen on Sunday disclosed an agreement on a framework for a 15 percent tariff across a wide range of EU imports for the 27-member trade bloc. The disclosure was made at a press briefing in Scotland.
Near the end of the briefing, Trump was asked about the Cambodia-Thailand border conflict and he said he spoke with both leaders. Noting that the U.S. does a lot of trade with both countries, and giving himself credit for paving the way for brokering peace deals such as the India-Pakistan ceasefire, Trump said he called the prime ministers of Cambodia and Thailand. 'We're not making a trade deal unless you settle the war,' Trump recounted. 'Getting those things settled, if I can do it, and if I can use trade to do it, it's my honor,' he said, adding that they both want to get a deal done.
The countries were given an Aug. 1 deadline to get their deals done. After that, tariffs climb up again.
Rick Helfenbein, an independent consultant and former American Apparel and Footwear Association chairman, president and CEO, said that the baseline for trade deals seems to hover around the 15 percent range. That's the range for 15 percent for Japan, 19 percent each for Indonesia and Philippines, and 20 percent for Vietnam.
Cambodia has become a key country for footwear production, particularly in leather shoes. It also produces casual and outdoor shoes, as well as sandals. The Southeast Asian nation picked up some of the manufacturing that had moved out of China. If it can't get an agreement on the parameters for a trade deal by Friday, the tariff rate is set to go up to 36 percent. That also is the rate set for Thailand if a 'deal' fails to materialize by Friday.
TD Cowen analyst John Kernan said rates for all Southeast Asian nations will be higher than the current 10 percent pause rate and that if they go to 20 percent, that duty level is still likely 'mitigatable' under certain conditions. That would translate into a 5 percent price increase at the store shelves, with manufacturers absorbing about 10 percent of the additional cost, he said.
Still a question mark is India, also a shoe-producing country, that is close to a trade deal with the U.S., according to Trump earlier this month. That is why the nation hasn't received a tariff letter, but so far there's been no further indication of where the two are in terms of talks. India is facing a 26 percent reciprocal tariff rate.
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