Vietnam prepares to reap benefits of US-China trade war

A panel discusses the ramifications of the US-China trade war at a conference on “US–China Trade War: Opportunities and Challenges for Vietnamese Enterprises” held in HCM City.

Truong Dinh Tuyen, former Minister of Trade, said the trade dispute between two of Vietnam’s top trading partners would have both a positive and negative impact on the country.

The trade war could have serious consequences, including a disruption to the global supply chain, an increase in prices, and a drop in FDI worldwide.

A decrease in American imports from China could present a good opportunity for Vietnam to fill in the gap, experts said.

A recent report from the American Chamber of Commerce (AmCham) in Vietnam found that Vietnam was becoming more attractive to investors.

Up to 36 per cent of surveyed US companies said they wanted to expand their business in the country, compared to 21 per cent in Thailand and 19 per cent in Malaysia.

In April, the US announced a 25 per cent tariff on US$50 billion of Chinese goods. More than 800 Chinese exports, worth about $34 billion, were subject to tariffs starting on July 6, according to Tuyen.

At the same time, China also introduced countermeasures of the same scale by imposing its own 25 per cent tariff on 545 categories of US products worth $34 billion from the same day.

Don Lam, CEO of VinaCapital, told Vietnam News during a recent interview that the US-China trade war in the short term could bring benefits to Vietnam, especially in investment.

Because of the trade war and rising wages and costs in China, some investors in China are moving their business to other Asian countries such as Vietnam, Thailand and Malaysia.

Vietnam has shown an improving business environment and is attracting more investors, Lam said.

However, if the US imposes broader tariffs on China, it would affect the cross-border supply chain, including Vietnamese supplies used in many Chinese exports.

To minimise the risks arising from trade disputes, Vietnam should focus on expanding its access to other markets.

Vietnam is already a signatory of many free trade agreements, with two more major trade pacts coming in effect in the near future, the Comprehensive Progressive Trans-Pacific Partnership and the EU-Vietnam free trade agreement.

These FTAs willl give Vietnam an opportunity to increase exports to alternative markets.

However, Vietnam suffers from underdeveloped supply chains, a heavy reliance on imports of raw materials and a lack of supporting industries, Lam said.

The country should focus on overcoming these challenges to survive the trade war, and fully realise the benefits of the upcoming FTAs, he added.

In January, China became Vietnam’s largest export market with total export turnover of $3.708 billion, a 106 per cent year-on-year increase, according to the General Department of Vietnam Customs.

One of Vietnam’s key export items to China are electronic components which China uses to make products to export to the US. So, if the demand for Chinese products falls, Vietnam will suffer too, experts said.

The Republic of Korea-Vietnam trade

Also speaking at the meeting, Choi Bong Sik, chairman of the World Overseas Korean Traders Associations (OKTA), said that more than 7,000 Korean companies are operating in Vietnam.

"Korean entrepreneurs consider Vietnam a key for the future of The Republic of Korea,” he said.

The World OKTA has 141 offices in 70 countries with more than 7,000 official members and 15,000 young members representing the next generation of traders, he said.

The Republic of Korea and Vietnam together have the second-highest trading performance among 200 countries over the world, only after China.

In Vietnam, the Republic of Korea is the number one country in terms of FDI, with 30 per cent of Vietnam’s total FDI, which is 3.5 times higher than Japan’s, which is second.

Trade between the two countries is expected to continue to expand because of the Republic of Korea-Vietnam FTA, he said.

“The Republic of Korea has world-class technology in many areas of industries, and its small- and medium-sized enterprises want to enter the global market to overcome price competitiveness.”

He said the Republic of Korea considers Vietnam as the next China. “It is never easy to find your strategic partners for your future from North America, the EU or even Japan,” he said.