A simmering border dispute between Cambodia and Thailand, reignited in July 2025, has escalated into a full-blown crisis, disrupting over $5 billion in annual bilateral trade and displacing more than 270,000 people. Centered on contested territories like the Preah Vihear Temple and Ta Moan Thom along their 817 km shared border, the conflict has halted cross-border commerce, threatened the livelihoods of border communities, and strained economic ties between the two nations. A fragile ceasefire brokered on July 28, 2025, offers hope for de-escalation, but lingering tensions and economic fallout underscore the urgency of a lasting resolution.
Economic Fallout from Border Closures
The conflict has paralyzed a robust trade relationship, with Thailand exporting electricity, internet services, and consumer goods to Cambodia, while importing agricultural products and labor. In 2024, border trade exceeded $5 billion, with Thailand holding a $3 billion surplus. However, Thailand’s closure of all land border crossings in July 2025, coupled with Cambodia’s retaliatory ban on Thai imports, including fruits, vegetables, and media broadcasts, has brought commerce to a standstill. Local markets, vendors, and transport services in border provinces like Cambodia’s Preah Vihear and Thailand’s Surin, Sisaket, and Ubon Ratchathani have been hit hardest, with small-scale traders losing their primary income sources.
The economic ripple effects are significant. Cambodia, still recovering from the pandemic, relies on tourism and garment exports, while Thailand faces political instability and a stagnant economy. Both nations are bracing for potential US tariffs of 36% starting August 1, 2025, which could further strain their economies. The conflict’s timing exacerbates these challenges, diverting resources to military efforts and infrastructure repairs. Artillery and rocket attacks have damaged civilian structures, including a hospital, petrol station, and Buddhist pagoda, adding to economic costs.
Displacement and Humanitarian Impact
The violence has displaced over 270,000 people, with 140,000 in Thailand and 134,707 in Cambodia as of July 27, 2025. Border communities, heavily dependent on cross-border trade and agriculture, face severe disruptions. Tourism, a key revenue source, has also suffered, with travel advisories from countries like the UK, US, and Australia warning against visiting border areas within 50 km. Culturally significant sites like Preah Vihear, a UNESCO World Heritage Site, and Ta Moan Thom have become flashpoints, deterring visitors and further hurting local economies.
Migrant Workers Caught in the Crossfire
Thailand hosts between 500,000 and 1 million Cambodian migrant workers, who play a critical role in sectors like construction and agriculture while sending remittances home. The conflict has raised fears of expulsion, with Cambodian leaders urging workers to return. Reports of violence against Cambodian workers in Thailand, though unverified, have heightened tensions. A mass exodus of workers could disrupt Thailand’s labor market and reduce Cambodia’s remittance income, deepening the economic toll on both sides.
Roots of the Conflict
The dispute traces back to colonial-era treaties and differing interpretations of the 1962 International Court of Justice (ICJ) ruling, which awarded Preah Vihear Temple to Cambodia but left surrounding areas contested. Ta Moan Thom, claimed by both nations, has been a recurring flashpoint, with Thailand alleging Cambodia built structures on its territory in 2024. The July 2025 escalation, marked by heavy fighting, rocket attacks, and accusations of ceasefire violations, has brought the century-old dispute to a boiling point. Both countries have accused each other of aggression, with Cambodia claiming Thai forces targeted civilians and Thailand alleging Cambodian provocations.
Ceasefire and Path Forward
On July 28, 2025, Malaysia, with support from the US and China, mediated an “immediate and unconditional ceasefire” effective at midnight. By July 30, signs of calm emerged, with some displaced residents returning to border areas. However, mutual accusations of ceasefire violations and the lack of a permanent resolution threaten sustained peace. The Joint Boundary Commission, established in 1997, has made little progress in resolving territorial disputes, and independent monitoring is needed to prevent further clashes.
Restoring commercial activity hinges on reopening border checkpoints, resuming diplomatic talks, and rebuilding trust. Cambodia’s decision to cut Thai electricity and internet services has disrupted businesses, particularly in border regions, while Thailand’s border closure has halted the flow of perishable goods. Both nations must address these disruptions to stabilize their economies and support affected communities.
Broader Implications
The conflict underscores the fragility of regional stability in Southeast Asia, where historical disputes can quickly escalate into economic and humanitarian crises. The involvement of external powers like the US and China in ceasefire talks highlights the international stakes, as a prolonged conflict could destabilize ASEAN unity and trade networks. For Cambodia and Thailand, resolving the dispute is not just about territorial claims but about safeguarding a vital economic partnership and protecting vulnerable populations.
As the ceasefire holds, both nations face a critical juncture. Reopening borders, restoring trade, and addressing the needs of displaced communities and migrant workers are immediate priorities. A long-term solution, potentially through renewed ICJ arbitration or bilateral talks, is essential to prevent future flare-ups. For now, the $5 billion trade relationship and the livelihoods of millions hang in the balance, making diplomacy the only path to recovery.