To a small saucepan, add water, palm sugar, fish sauce, and tamarind paste. Turn heat to high and bring to a boil. Once boiling, reduce heat to a simmer. Add chile powder; whisk to break up the palm sugar and tamarind pulp. Continue cooking on a low simmer, 5-8 minutes. Pour dipping sauce into a bowl and cool to room temperature. Makes about 1½ cups. You can store it in the refrigerator in a sealed container for weeks.
This is a "naam jim" (dipping sauce) meant to be served with Chiang Mai Roasted Chicken. It's also delicious with grilled food.