May 13, 2019 / 12:56

US – China trade war escalation benefits Vietnam

The Hanoitimes - Vietnam has an opportunity to jump in and offer goods that avoid the increasing tariffs.

Vietnam, along with Brazil and Mexico, could make marginal gains in areas such as manufacturing and agriculture should US – China tensions continue after recent escalation, the South China Morning Post (SCMP) reported. 
Illustrative photo.
Illustrative photo.
The US officially raised tariffs on US$200 billion of Chinese goods from 10 to 25% last Friday, in a new escalation of tensions even as China’s Vice-Premier Liu He visited Washington for talks.

The trade war between Washington and Beijing has already caused shifts in global trade, and will continue to create winners and losers as businesses try to cope with increased uncertainty.

Rob Koepp, Hong Kong director of the Economist Corporate Network, told SCMP that US-initiated tariffs have mainly hit lower-end and labor-intensive sectors. 

Koepp added economies are well positioned on the sidelines, like Vietnam and Brazil, then have an opportunity to jump in and offer goods that avoid the increasing tariffs. 

The latest official monthly figures from Vietnam for April showed a 29% increase in US-bound exports year-on-year, while capital contributions from foreign investors were up 215%, largely in manufacturing.

A study by The Economist Intelligence Unit late last year suggested that many countries around Asia could reap the benefits of filling China’s shoes in exports to the US. Malaysia and Vietnam were projected to be the biggest winners in IT equipment manufacturing, while Bangladesh, India and Vietnam were potentially able to enjoy a boost in exports of ready-made garments.

With growing concern over the US – China trade war, increasing wages and potential threat of tariff hikes, Vietnam is fast becoming an attractive alternative for investors, Adam McCarty, economist at Hanoi-based Mekong Economics, told Tuoi Tre newspaper. 

The trade war is facilitating a wave of production shift out of China due to high costs, it is hard to tell how many factories would move to Vietnam without the trade war, added McCarty. 

Nevertheless, Maxfield Brown, senior associate with Dezan Shira & Associates in Ho Chi Minh City, warns Vietnam’s infrastructure networks, labor pools and local suppliers would be pushed to the limit as investors pouring in money into Vietnam. 

Capital inflows from mainland China, Hong Kong and Macau stood at US$700 million in 2011, but by last year had topped US$2.4 billion.

This trend would continue to this year, with China being the largest investors among 51 countries and territories that had fresh projects in Vietnam in the first four months of 2019 worth US$1.31 billion, accounting for 24.53% of the total and nearly double that of Singapore in the second place with US$700 million, according to the Ministry of Planning and Investment. 

Some of the big-ticket projects in the January – April period from China include US$3.85 billion in capital contribution from Hong Kong -based Beerco Limited to Vietnam Beverage for a beer project in Hanoi; the US$260-million electronic manufacturing plant by Goertek (Hong Kong) located in Bac Ninh province; tire manufacturing plant worth US$280 million from a Chinese investor in Tay Ninh province and a similar project worth US$214.4 million financed by Guizhou Advance Type Investment (China) in Tien Giang province.