Economy

US tariffs on China show a boon for Vietnam

Nguyen Huu Phuc was “very upset” when Donald Trump pulled the US out of the Trans-Pacific Partnership commerce settlement in 2017. However two years later Mr Phuc, who runs Como, a small textile advertising firm in Ho Chi Minh Metropolis, is in a buoyant temper.

His group’s garment-making division plans to double its workers to greater than 1,000 by the tip of this yr due to surging demand for its shirts, trousers, sleepwear and different merchandise.

He says he has Mr Trump to thank for it — the US-China commerce struggle is benefiting Vietnam greater than some other nation in Asia as extra producers, patrons and traders shift their provide chains away from China.

“The commerce struggle between Donald Trump and Xi Jinping’s two nations could make issues higher for Vietnam — and never solely Vietnam however Taiwan, Korea, Myanmar, Laos, Cambodia and Bangladesh, who’re additionally good at textiles,” Mr Phuc mentioned. “That’s the reason we’re investing quite a bit.” 

US imports from Vietnam surged by practically 40 per cent within the first 4 months of this yr in comparison with the identical interval final yr, in keeping with a Monetary Instances evaluation of knowledge from america Worldwide Commerce Fee. This was the most important rise among the many 40 largest importers to the US.

Over the identical interval, US imports from China fell by 13 per cent, the second-largest contraction since 2009.

The shift is lifting gross sales at Vietnamese producers and suppliers not solely in textiles, however a spread of different sectors starting from seafood to semiconductors; sectors by which the US has levied tariffs on their Chinese language counterparts have made the most important features.

Within the first 4 months of this yr, US imports of cell phones from Vietnam greater than doubled year-on-year, whereas imports from China contracted by 27 per cent, in keeping with information from the USITC. Over the identical interval, US pc imports from Vietnam rose by 79 per cent, in opposition to a 13 per cent drop in Chinese language imports.

“These days I see plenty of patrons from China and from the remainder of the world searching for various sources from Vietnam and different nations like Cambodia,” mentioned Vu Ngoc Khiem, nation supervisor in Vietnam for International Sources, an organization that goals to hyperlink up international suppliers to patrons.

US and European retailers stepping up their shopping for in Vietnam embody House Depot, Goal, Zara and OBI, Mr Khiem mentioned, and the vary of merchandise they’re shopping for embody baggage, attire, footwear, metal and aluminium.

For Vietnamese corporations reminiscent of Minh Phu Seafood, Vietnam’s largest shrimp producer, the “commerce struggle between China and the US will create many probabilities for us to increase our enterprise,” mentioned Le Van Quang, its founder and chief government.

Whereas the corporate’s Chinese language opponents used to import uncooked product from Vietnam and India to course of it domestically and export it to the US, they’ve stopped doing so because the Trump tariffs eroded their margins, he mentioned. US imports of fish from Vietnam rose by greater than 40 per cent within the first 4 months of this yr, in keeping with USITC information, whereas imports from China fell.

Vietnam is benefiting specifically as a result of it sells lots of the merchandise hit by the tariffs. 

“Vietnam is an outlier, and the explanation for that’s that it occurs to promote plenty of the identical items that might be topic to tariffs in China,” mentioned Yasuyuki Sawada, chief economist on the Asian Improvement Financial institution. 

The ADB has estimated that Vietnam stands to realize as much as a cumulative 2 per cent of GDP over three years if the US-China commerce dispute escalates additional.

The commerce struggle has accelerated a longstanding pattern by which some corporations — Chinese language, US and others — arrange factories in Vietnam to flee rising wages, labour shortages and tighter environmental laws elsewhere. Overseas direct funding in Vietnam reached a file $18bn final yr, up practically 20 proportion factors to 58 per cent of GDP — topping most different south-east Asian nations.

“Extra abroad prospects are looking for Vietnam — the demand is healthier,” mentioned Quach Kien Lan, director of Greenyarn, a Vietnamese material producer that’s experiencing rising orders due to the rise in US textile tariffs on China.

Nonetheless, Vietnamese producers and policymakers don’t see the commerce struggle as an unalloyed win. 

Hanoi is already in Mr Trump’s crosshairs as its commerce surplus rises; it was up 43 per cent within the first 4 months of this yr, behind solely China, Mexico, Japan and Germany. Final month, Vietnam solely narrowly averted being labelled a forex manipulator by the US Treasury.

In the meantime, some exporters have sought to capitalise on Vietnam’s standing as a relative secure haven by relabelling Chinese language items as “Made in Vietnam” — a follow Vietnam’s customs division vowed earlier this month to crack down on. 

Balancing relations with the 2 nice powers is a preoccupation for Vietnamese producers, who’re apprehensive concerning the unpredictability of the commerce struggle — and of Mr Trump. 

Greenyarn’s Quach Kien Lan mentioned that the shift could possibly be “extra of a problem than [a] good” as a result of companies reminiscent of his personal are investing in factories or shares with out realizing how — or whether or not — the dispute shall be resolved.

“The commerce struggle between China and America may be over on the finish of this yr, or it might proceed,” he mentioned. “And when it ends what is going to occur? Vietnam and the US don’t have any commerce settlement. What’s going to occur to Vietnam then?

“We’re sort of afraid of this commerce struggle. How lengthy will it final?”

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