The Hanoitimes - Only 2.2% of Vietnamese shipments abroad are part of China’s value chain and goods that serve as inputs to China’s exports, much lower than those of regional peers.
Vietnam was predicted to receive the least impact among ASEAN member countries in case the US imposing 25% import tariff on Chinese goods, according to MB Securities (MBS).
In its latest report, MBS cited a research from Malaysia-based MHB Bank saying only 2.2% of Vietnamese shipments abroad are part of China’s value chain and goods that serve as inputs to China’s exports, much lower than those of regional peers, such as the Philippines with 16.9%, Malaysia with 11.4%, and Indonesia with 11%.
Currently, both China and the US are Vietnam’s main export markets. The country’s exports to the US and China in 2018 were US$49.2 billion and US$41.2 billion, respectively, accounting for 37% of total exports.
The brokerage expected the trade war would cause a recession in the US and Chinese economies, leading to a decline in Vietnam’s exports.
Additionally, Vietnam is among top five countries that the US has the largest trade deficit with. Most of Vietnamese exports to the US are smart phones, textile, footwear, among others.
According to MBS, a number of Vietnam’s export staples have Chinese-originated input materials, therefore, an escalation in US – China trade war may lead to US imposing tariff on Vietnamese exports as part of its indirect retaliation to China.
China’s possible devaluation of Yuan would then put pressure on Vietnam to devalue its Dong to maintain the competitiveness of Vietnamese goods. Moreover, investors may pull out investment capital from emerging markets, due concern over a recession of China’s economy, again putting pressure on VND.
Vietnam, nevertheless, is presented with opportunity to partly replace China in exporting goods to the US. Vietnam’s economy has high level of openness through the participation in 15 free trade agreements, leading the country to be an ideal destination for global manufacturers.
MBS’s report suggested Vietnam could become a new production hub of the world by grasping this opportunity.
A recent assessment by the Economist revealed the US – China trade war would benefit Vietnam with a number of export products.