IN BANGKOK, investors were more cautious, and in Phnom Penh, there was a lot of worry. The Thai SET Index started lower, with companies in travel, retail, and industries connected to the border areas not doing well. Thai brokers noted that smaller companies were losing money, while investors were buying into telecom and basic goods sectors.
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| PHOTO: REUTERS |
The baht was weakening because of hedging needs, while short-term government bonds in Thailand were getting more attention as traders thought growth might slow down. In Cambodia, the stock market continued to fall, with the market value dropping around 12% in recent weeks. This was due to fears about fuel supplies and the stoppage of Thai fuel imports. Tourism-related businesses also did poorly because arrivals in July dropped by 70% compared to the previous year, a big change for a market that depends on visitors from China and Thailand.
In other parts of the region, things were not as bad.
Indonesia and Vietnam had mixed results, and Malaysia's currency stayed steady. However, credit traders were more cautious about Thai high-yield corporate bonds linked to logistics and border trade, showing that companies in these areas were facing tighter money.
The discussion around tariffs is important because they affect industries that the US has pushed Thailand and Cambodia to develop as part of the China+1 strategy.
Cambodia's main exports to the US include clothing, shoes, and travel goods, while Thailand exports cars, parts, electronics, food, and rubber. If the US uses Section 301-style tariffs to push for a ceasefire, US businesses like retailers and car makers will face higher costs, especially as inventory levels drop before the end of the year. Thai media and business groups have expressed concern that this is causing collateral damage to US supply chains. A Thai newspaper headline said that border trade disruptions are shaking supply chains. Cambodia's garment factories are particularly vulnerable; a tariff shock after years of scrutiny on labor practices could push small factories to the edge. This could reverse the trend of moving some orders out of China to Southeast Asia after the pandemic.
In Bangkok, the government is under pressure from nationalists to not appear weak in the face of tariffs while civilians are under attack.
The economic effects in Washington are less clear—tariffs won't stop the fighting, but they will increase prices for US consumers.
The trade between Thailand and Cambodia, worth over 174 billion baht last year, involves workers, truckers, and cash economies at border checkpoints like Aranyaprathet and Poipet.
Reports from Sa Kaeo describe closed markets and trucks waiting because insurance companies are not covering transport into Banteay Meanchey. When a key trade corridor shuts down, things get worse—perishable goods rot, factories miss deliveries, and inventory at places like Phnom Penh and Siem Reap runs low. Cambodia's reliance on imports makes the situation harder. The ban on Thai fuel, plus shaky refining operations elsewhere, has made the power market and wholesale businesses uneasy.
The Thai Commerce Ministry estimated over 10 billion baht in evacuation and property damage, which could be underestimated if the situation continues. Nation Thailand warned that potential losses across both countries could be around 181.7 billion baht if the conflict lasts, matching reports of empty hotels and stuck cargo. Humanitarian issues add to the economic risks—Thai health officials reported 14 civilians, including children, killed and 31 injured from rockets hitting homes and stores. When rockets hit hospitals and supermarkets, insurers pull back, banks reduce loans, and small businesses fail. Al Jazeera's reports of security forces using rubber bullets and tear gas to manage clashes increase the sense of disorder in key border towns.
Politically, the situation is different for each country.
Bangkok sees a delayed ceasefire as a way to gain leverage on long-term border issues and militia activity. This raises the cost of appearing to give in to pressure, especially from the US. Thai officials have stressed the importance of sovereignty and fairness, and the foreign minister's statements have been widely quoted.
In Cambodia, the economic impact is immediate and visible, especially in tourism, fuel, and garment sectors, and the drop in market value on the CSX shows how investors are reacting. The government's willingness to talk could seem reasonable to other ASEAN nations and the US. However, neither side wants to show weakness, and both are now making public red lines, complicating efforts to negotiate. President Donald Trump's offer to “make a phone call” reminds people of his role in getting a ceasefire in July. However, the resumption of fighting suggests that phone calls are only a temporary solution.
ASEAN mechanisms are not being used much, and a reliable third-party monitoring system at key areas could reduce the risk more than threats of tariffs ever could.