Asia Business Channel

U.S. – China Trade War effects Vietnam less than other ASEAN countries

 

The expanded trade war that the United States has initiated with China will affect ASEAN’s economic growth, but according to a report by MB Securities, Vietnam is the least effected country within the ASEAN group.

According to the report, Vietnam has the lowest ratio of its exports used as raw materials by Chinese companies that are sourcing raw materials from ASEAN countries and therefore is the least affected by U.S. tariffs on Chinese goods. The report states that only 2.2% of Vietnam’s total export value are raw materials used in Chinese exports to the U.S. The percentage for other key ASEAN countries is: the Philippines – 16.9%; Malaysia – 11.4%; and Indonesia – 11%.

Based upon Vietnam’s low ratio of raw materials used in Chinese goods, economists believe that Vietnam will see very little effect from the U.S. decision to raise tariffs from 10% to 25% on $200 billion USD of Chinese goods.

MB Securities also noted cautiously that Vietnam is among the top five countries that the U.S. has the biggest trade deficits with and that because many of Vietnam’s core exports to the U.S. contain raw materials that have been imported from China, the U.S. could target Vietnam and levy tariffs on Vietnamese goods as a way to indirectly tax China and lower the U.S. – Vietnam trade defecit.

Trade statistics show that Vietnam exported $90 billion USD worth of goods to the U.S. and China in 2018, which equals 37% of Vietnam’s export turnover for that year.

Economists and government officials also note that as Chinese devalues its yuan against the dollar that Vietnam will need to monitor and flexibly change its currency exchange rates so that Vietnamese goods can maintain their price competitiveness.

On a positive note, the U.S. – China trade war provides Vietnam with an opportunity to replace China’s exporting role to some extent. Vietnam is now participating in 15 different free trade agreements, and the country is positioning itself as an ideal location for export manufacturing companies.

Vietnam is manufacturing many of the products that China exports in large numbers, including computers, footwear, smartphones and textiles and the country is see as a location with stable government policies that do not discriminate against foreign companies or impose the restrictions that many foreign companies encounter in China.

 

 

Read 125