The textile industry has more opportunities thanks to the US-China trade war

The export of textile and garment is positive in the first months of 2018. Photo: Nguyen Hue.

Add market share to US market

According to Bao Viet Securities Company, Vietnam's textile and garment industry is one of the most promising sectors in the US-China trade war. In 2017, the US market accounted for 17% of China's total garment exports, while 50% of garments in the United States are originated in China. Thus, it can be seen that in this group, the US is in a more dependent position than China. According to BVSC, increasing taxes will give US multinational companies operating in China as well as Chinese domestic firms a stronger incentive to divert garments orders and production to other countries to avoid taxation. The competitive countries in the clothing sector such as Vietnam, Bangladesh, Cambodia ... will benefit as the US-China trade war escalates.

As for Vietnam's textile and garment industry, during the US-China trade war, the Yuan sharply devalued against the dollar, the Yuan also devalued against the Vietnam dong, which helps enterprises to import fabric and textile materials at cheaper prices. Besides, Vietnam's textile and garment industry can gain more market share from China thanks to its competitive price.

Analysis of the textile industry of Vietnam International Securities Joint Stock Company also showed that the US has imposed a 25% export tax on textiles and garments from China, giving Vietnam the advantages of exporting textiles and garments to the US as a direct competitor to China. Of the 20 Chinese items taxed by the United States, Vietnam has five goods including: Canvas Fabric, tire cord fabric, woven fabrics of long synthetic fibers, short PE synthetic fibers.

Export turnover of 35 billion USD is achievable

However, according to Vietnam International Securities Joint Stock Company, when the supply to the United States declines, China will seek alternative markets, so Vietnam will be more or less affected. In addition, China is the main import market of Vietnam raw textile materials. Many Vietnamese spinning companies are exporting 70-80% of their production to this market. In the near future, when the US-China trade war is widened, items such as fabric and yarn will be affected first and directly.

In addition, the fact that the United States initiated the trade war with China will be an opportunity for competing countries with China, such as Vietnam, Mexico, Cambodia and Bangladesh. This is an opportunity for the Vietnamese textile and garments industry. However, there is another problem that China can move their production to neighboring countries to take advantage of labor costs, trade, and take a detour into the United States. At that time, Vietnamese businesses will likely face an investment wave from Hong Kong, China and Taiwan.

According to Vietnam Textile and Apparel Association (VITAS), in the first eight months of 2018, the textile and garment export turnover reached nearly 20 billion USD. In particular, the US market accounted for nearly 50%, followed by the EU, Japan and South Korea. Especially, Vietnamese textiles and garments have entered the Chinese market. This is the breakthrough development of the textile industry from 2017 to present.

Regarding the impact of the US-China trade war, Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association, said that the US-China trade war is evolving in favor of Vietnamese goods, including textiles. With positive results in the first months of the year, the total export turnover of garment and textile industry in 2018 is expected to reach 35 billion USD, exceeding the target by about 1 billion USD. Concerning about the detrimental effects of trade war on origins, Mr. Giang said that this depends on the role of state management agencies in strictly controlling the border and the market.

However, the Association also recommended that businesses in the textile industry always comply with international legal regulations. "However, the risk of fraud, if any, is not great, because big American and Chinese importers themselves are aware that the "price" will not be small when they are underestimated by international partners for business transparency," stated Mr. Giang.