U.S.-China Trade Tensions: Opportunity for Vietnamese Exporters
The trade war between the world’s two largest economies broke out in July 2018, with the U.S. imposing import duties on US$34 billion of Chinese goods on accusations of violating intellectual property rights and conducting unfair trade. After many tariffing rounds, the U.S. levied taxes on a total of US$250 billion of Chinese goods and China retaliated it with US$110 billion on U.S. goods. In early May 2019, this trade war escalated further when the U.S. suddenly raised tariffs on US$200 billion of Chinese goods because it thought Beijing had changed its commitments. Then, China hit back with taxes raised on US$60 billion of US goods.
The war has been, and will be, causing significant trade implications. In a recent report by the American Chamber of Commerce in Singapore (AmCham Singapore), 54% of businesses surveyed thought that the trade war affects investment (plans are stopped or cancelled), 4% higher than a year ago. At the same time, many are considering readjusting supply chains away from China and the U.S. In addition, in June 2019, 41% have seen a ‘slight’ negative impact from the trade war, and 8% registered ‘strong’ negative, while 32% reported no impact. 40% see the trade war deteriorating further, with 30% each saying it’ll stay the same or be resolved soon.
This rather matches judgments by most experts in the world that the United States partially conceded China with a recent move: Allowing U.S. technology companies to sell goods to Chinese leading technology firm Huawei. Even Washington left open the opportunity when it announced that it wanted China to buy a large volume of U.S. agricultural products. And, this is also an essential step to promote positive peaceful solutions to U.S. - China trade war.
Impacts on Vietnam
What should the Vietnamese business community do to adapt to and approach the rapid developments caused by the ongoing U.S.-China trade war, particularly when the EU - Vietnam Free Trade Agreement (EVFTA) was signed on June 30, 2019?
Dr. Nguyen Hoang Dung from the Faculty of External Economics, the University of Economics - Law (the Vietnam National University of Ho Chi Minh City), said Vietnam is advantageously one of the five countries with the lowest production cost in the world. Therefore, when goods exported from China to the United States are subject to high tariffs, companies will tend to relocate their production facilities in China to other countries, and Vietnam, a neighbor to China, will always be on their priority list.
Typical names in this wave include major South Korean manufacturers like Samsung Electronics, Hyundai Motor, Kia Motors and LG Electronics. Particularly, Samsung Electronics has scaled down the production output of its last factory in China and half of its global mobile phones are currently manufactured in Vietnam.
In another signal, when the U.S. confronts China, goods from other countries will have a better chance of competing in the U.S. market. Particularly for Vietnam, data showed that the country’s export value to the U.S. reached US$20.7 billion in the first four months of 2019, up 34.8% year on year. Of the sum, footwear brought home US$2 billion (up 13.5%), wooden products fetched US$1.42 billion (up 34.7%), telephones earned US$3.32 billion (up 94.4%), said Mr. Dung.
Mr. Pham Tat Dat, Director of FADO Joint Stock Company, recommended that Vietnamese businesses quickly utilize advantages of trade disputes through online export, because both U.S. and Chinese governments use tariff measures on each other’s goods. Of course, they will have to seek alternative sources from countries unaffected by this confrontation. Therefore, this will be a great opportunity for Vietnam's exports to enter the U.S. market, with key commodities such as furniture, seafood, fruits, apparels and electronic items. Meanwhile, China will come to Vietnam to seek soy and wheat supplies.
Besides, Vietnamese companies need to fully tap e-commerce markets, an effective channel for us to access the world market as well as importers. They can look for opportunities to do business from giant electronic exchanges such as Amazon and Alibaba. The success story of Tanisa Salt - a salted shrimp seller - shows the tremendous power of e-commerce application in business for micro and small companies in Vietnam. Its monthly sales skyrocketed from only VND200 million to VND5-6 billion. It searched and utilized commercial advantages from the U.S. - China trade war, said Mr. Nguyen Minh Duc, CEO of IM Group.