The impact of trade wars on Vietnam from the statistics of Customs

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The growth rate of imports from China compared to the national average and main markets by the end of July 2019. Chart: Binh

Changes in phone and phone accessories exports

Listed in the import and export statistics of the General Department of Customs in 2010 after Samsung Electronics Vietnam Co., Ltd. (SEV) in Bac Ninh came into operation with stable exports, phones and components quickly became Vietnam's leading export group.

After only about 10 years of contribution, phones and components have been stable at top position in the country’s exports. Moreover, the statistics of the General Department of Customs show that, every year, this key product group always achieves a 2-digit growth rate.

However, there are changes in the first months of the year when the exports of phone and components face difficulties, despite being at the top of the ranking.

In particular, in the first months of the year, this group slumped. By the end of April, the export turnover of phones and components reached US$16 billion, down by 0.4% compared to the same period of 2018. Since May 2019, the largest export sector of Vietnam has positive growth of 2.2%. By the end of July, the turnover of this group reached nearly US$27.5 billion, up by 3.8%.

It can be seen that this is the lowest growth rate of the group for many years. For example, by the end of July 2018, the growth rate was 17.4%; the same period of previous years was 14.8% (2017), 14.6% (2016), 28.5% (2015), and 15.5% (2014).

There is no specific information about the sudden slowdown in the growth rate of phone and component exports. However, there is a lot of relevant information stemming from the tension of Korea-Japan trade that has emerged since the end of 2018.

The two sides took many actions to limit bilateral trade activities. Notably, Japan has tightened regulations on exporting high-tech materials used in manufacturing smart phones and chips to the South Korean market. In particular, the restricted materials are fluorinated polyimide used in the manufacture of smart phone screens, colorants and high-purity hydrogen fluoride used as etching gas in semiconductor manufacturing.

Japan’s move caused many disadvantages for the world's leading electronics manufacturers from South Korea, especially in the fields of phones, computers and televisions, such as Samsung and LG.

This is similar to the statistics provided by the General Department of Customs.

In addition to the slowdown in export turnover, in the first 7 months of the year, imports of mobile phones and components were only US$7.25 billion, down by 2% compared to the same period last year, while a significant proportion of turnover is used to import components for Samsung Group's phone production. The input components are reduced, so the export production activities of this key product group are affected.

Vietnam's market share of key import markets by the end of July 2019. Chart: Binh.

Chinese goods ‘flood’ into Vietnam

Among trade wars between large countries, the most important is the confrontation between the US and China. The "tit-for-tat" of the world's two largest economies not only impacts these two countries' markets but also affects global trade. Vietnam is not outside of that influence, especially as China is the largest trading partner and the largest import market of Vietnam, and the US is our country's largest export market.

Many forecasts have been made by managers and experts when the US-China trade war started. Accordingly, China is considered the "world's factory" that will seek to boost exports to other markets to avoid difficulties and barriers from the US market.

While China is a neighbour of Vietnam with many advantages in road, sea, rail traffic and aviation, it will be difficult to avoid the "flood" of Chinese goods.

The statistics of the General Department of Customs in the first months of the year also prove it. Although the overall import growth rate of the whole country from many important markets is low, the import from China alone is at a double-digit growth. Specifically, by the end of July, total import turnover of goods from China reached US$42.5 billion, up by US$6.6 billion (equivalent to 18.4%) compared to the same period last year. Particularly, the Chinese market accounted for 29.5% of the total import turnover of the country.

Notably, the growth rate of imports from China was double the national import growth rate (the whole country increased by 8.6%).

Many large commodity groups imported from China have high growth. For example, computers, electronic products and components with a turnover of US$6.91 billion, increased strongly by 65.9%; machinery, equipment, tools and spare parts reached US$8.04 billion, up by 26.7%; the group of textile, leather and footwear materials and accessories reached US$6.66 billion, up by10.8%; plastic materials and plastic products reached US$2.12 billion, up by 18.4%.

For a developing economy with the strong import-export activities and large processing, export and factories of multinational corporations, Vietnam has been affected by the current trade wars. The statistics of the General Department of Customs partly shows that.

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However, the impact of trade wars not only has adverse factors, because it also brings many opportunities for our country to receive the shift of investment flows. The problem is that the management agencies and the business community must have appropriate defense measures to minimize risks, including the risk of origin fraud, and at the same time make good use of the current opportunities to expand production and business activities, especially with Vietnamese enterprises and products.