The escalation of US-China trade war: Many opportunities and great challenges

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The US- China trade war will greatly affect Vietnam’s export goods. Photo: H.T

Facing the increasingly tense US-China trade war, talking to Labour News on August 24, many enterprises said there are many opportunities but it is difficult to take advantage.

Compete with Chinese companies in the domestic market

Dinh Cong Khuong, Director of Khuong Mai Steel Company said that on August 24, Ho Chi Minh City Steel Business Club held the first programme on business coffee and discussing the opportunities and challenges of the steel sector in 2019. Almost all steel enterprises said when the US-China trade war escalates, opportunities for enterprises are insignificant but challenges are remarkable as purchasing power decreases. Meanwhile, the characteristics of the blast furnace steel plant are operating 24/7, the output cannot reduced but the decrease in demand will cause price competition for enterprises.

"Enterprises must actively consider and respond to financial balances to purchase and import goods. If the trade war takes longer, it will affect the business and production of enterprises,” Khuong said.

Vice Chairman of the Vietnam Leather, Footwear and Handbag Association, Diep Thanh Kiet, said the request by US President Donald Trump for US companies seeking a plan to withdraw from the Chinese market, including bringing the companies re-operate, will have positive and negative impacts on Vietnam. Currently, the production capacity of the Vietnamese tootwear industry is over 1 billion pairs per year and it would take 10 years to double this capacity. Meanwhile, China exports 1.7 billion pairs to the US. If half of these Chinese shoes are sent to Vietnam for production, the Vietnamese footwear industry could not do it. Vietnam exports 460 million pairs of shoes per year, if the turnover surges sharply, the risk of the US applying the anti-dumping tax on the whole footwear industry is high, Kiet said.

According to enterprises, not only the footwear industry, but also China's textile, fishery and electronic industries also tend to shift to Vietnam to avoid taxes. This will put pressure on domestic enterprises to compete on labour, land, affecting the whole economy.

Vietnam has been affected

The forecasts on benefits to Vietnam from the US-China trade war are not correct. Dr. Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) said Vietnam has been affected from this war by a decrease in exports and FDI capital.

Specifically, the export growth rate in the first half of 2019 is only less than half of that in 2018 in almost all markets and only increases in the US market of 33 percent, causing the risk of controlling origin. For the investment, the additional investment capital and share purchase by foreign investors reached US$18.4 billion, decreasing by 9.2 percent compared to 2018. In addition, Chinese goods that directly compete with Vietnamese goods in the domestic market and world markets also put pressure on domestic enterprises. In response, the State needs to strengthen the control and protect goods originating from Vietnam before the signals of trade fraud in origin of goods exported to the US are detected.

Trade war puts steel products at risk of unfair competition Domestically-produced steel products are facing the risk of unfair competition from those originating from China as result ...

Dr. Tran Dinh Thien, the member of the National Monetary and Financial Policy Advisory Council, also said long-term negative impacts should be anticipated due to the impact of the trade war. "This war negatively affects the trade, investment and monetary policy of many countries, including Vietnam. Challenges are not difficult, but how can we overcome the influence of this war," Thien commented.

In addition, according to experts, there should be solutions to reduce the trade deficit with the US to avoid disadvantages and risk of tax imposition.