Chinese President Xi Jinping’s government is moving ahead with the Funan Techo Canal in Cambodia, a $1.2 billion infrastructure project that’s part of China’s deep investments in the country bordering Thailand, Laos and Vietnam.

The 152-kilometer (94-mile) waterway would link Cambodia’s manufacturing belt with the Gulf of Thailand, widening a channel for exports from one of Southeast Asia’s poorest economies while creating jobs and opportunities along the route, Bloomberg’s Josh Xiao reports this week. (Click here to read the full story.)

Read More: Trump Tariffs Are a ‘Disaster’ for World’s Poorest Countries

Beyond the construction work needed, there’s a delicate diplomatic balancing act to pull off. Cambodia’s government is trying to maintain good ties with both China and the US, but the country’s reliance on Chinese funding has fueled concerns it’s becoming a client state. Diplomats say it will become harder to maintain that balance in the future.

For years, Cambodia has relied heavily on China, which has invested far more in roads, bridges and factories than the US. But since taking office in 2023, Prime Minister Hun Manet — a West Point-educated successor to his father — has also welcomed visits from top US military officials and signaled a desire for more balanced diplomacy.

China now holds a third of the country’s debt, and bilateral trade hit a record $15 billion last year, according to official data.

Total goods trade with the US, meanwhile, reached about $13 billion in 2024, up 9.2% from a year earlier, according to figures from the Bureau of Economic Analysis in Washington.

Read More: Xi Urges ‘Asian Family’ Unity as Trump Aims to Confine China 

America’s presence in Cambodia in recent decades has been tied to USAID’s economic development work. In late February, the Trump administration canceled a project supporting child literacy and another focused on nutrition for kids. A key bridge for US influence closed, and a door quickly opened for China to step in with nearly identical assistance.

President Donald Trump’s move to pull foreign aid happened just as the US hit the Cambodia with a 49% tariff — close to the highest of all countries targeted. The peak levels of all his so-called reciprocal tariffs were suspended until early July to give bilateral negotiations time to play out, but such tough measures threaten to push Cambodia further into China’s orbit.

—Brendan Murray in London

Bloomberg’s tariff tracker follows all the twists and turns of global trade wars. Click here for more of Bloomberg.com’s most-read stories about trade, supply chains and shipping.

Charted Territory

Trade war damage | The IMF sharply lowered its forecasts for global economic growth this year and next, warning the outlook could deteriorate further as Trump’s tariffs fuel a trade war. The downgrades add weight to similar warnings from Wall Street banks in recent weeks, with JPMorgan and Goldman Sachs saying the chances of a recession in the US have spiked. Separately, Germany’s private sector unexpectedly shrank for the first time in four months as concerns over tariffs triggered a sharp drop in services activity.

Today’s Must Reads

• Apple and Meta were hit by relatively modest European Union fines totaling €700 million for violating tough new antitrust rules for Big Tech following warnings of harsh retaliation from Trump. Separately, a top European Central Bank official said Trump has signed up the whole world to a “lose-lose game” on trade based on flawed economic arguments.
• Trump said he plans to be “very nice” to China in trade talks and that tariffs will drop if the countries can reach a deal, a sign he may be backing down from his tough stance. Elsewhere, Treasury Secretary Scott Bessent said the tariff standoff with China can’t be sustained and that the two sides will have to find ways to de-escalate current tensions.
• India is considering cutting tariffs on high-end motorcycles such as Harley-Davidsons to zero, as New Delhi strategizes on how to cut a trade deal with Trump without conceding too much of its own protectionism. Meanwhile, India’s high tariffs on imported autos may get lowered in talks with the US and EU.
• Virgin Atlantic Airways founder Richard Branson slammed Trump’s tariffs as “erratic and unpredictable” actions that have knocked previously buoyant businesses into unknown territory.
• Volvo’s income declined in the first quarter as uncertainty around US tariffs hit demand for trucks in North America.
• Trump wants legal challenges to his tariffs to be heard by a specialized trade court, an approach that worked in his favor during his first administration even though it didn’t give him an immediate victory.

On the Bloomberg Terminal

• China is holding out hopes for level-headed trade talks with the US, not a pact narrowly focused on currency arrangements, according to Bloomberg Economics.
• Trump said he has directed the Defense Department to move additional forces for combat into the Middle East and to commence large-scale strikes in Houthi-controlled areas of Yemen, according to a letter from Trump to Congress.
• For Bloomberg Economics trade analysis: BECO MODELS TRADE
• Run SPLC after an equity ticker on Bloomberg to show critical data about a company's suppliers, customers and peers.
• Use the AHOY function to track global commodities trade flows.
• See DSET CHOKE for a dataset to monitor shipping chokepoints. 
• For freight dashboards, see BI RAIL, BI TRCK and BI SHIP and BI 3PLS
• Click HERE for automated stories about supply chains.
• On the Bloomberg Terminal, type NH FWV for FreightWaves content.
• See BNEF for BloombergNEF’s analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.

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