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America-China Trade War: Impacts on Vietnam

Saturday 07, 09 2019
America-China trade conflict: Vietnam’s at risk of being consumer of China’s redundant poor quality goods.
America-China Trade War: Impacts on Vietnam

Former Minister of Trade Trung Dinh Tuyen warned that Vietnam needed to be cautious during the America-China trade conflict as China might try to export redundant, poor quality goods to Vietnam due to the Yuan devaluation. 

1. “Vietnam prefers cheap goods…”

At the Conference on “the escalating trade conflict and the joys and worries of Vietnamese companies”, Former Minister of Trade Truong Dinh Tuyen shared his sharp thoughts on the pressure on the Vietnamese economy during the tense conflict between America and China. 

According to Mr. Tuyen, the America-China trade conflict is only the tip of the iceberg. What should be paid attention to is the conflicts on the development strategies of the two nations, with one growing rapidly and the other being a comprehensive global power. 

The growing tension of the conflict and the increasing impose of the import duties are even leading to many negative impacts on the global economy. 
For Vietnam, there have been positive signs such as the some exporting goods such as textile, technology, etc. since the America-China trade conflict commenced. The advantages is that a lot of Vietnamese goods would replace Chinese goods in the American market, facilitating Vietnam’s increasing export to America. 

Moreover, due to the effects of the trade conflict, a lot of foreign investors would withdraw their capital from the Chinese market. The two new potential markets are Indonesia and Vietnam, which are considered the countries that attract the most FDI currently. Vietnam is also forecasted to attract more capital in the coming time if we promote improvement of the business investment environment. 

However, the negative consequences of this conflict on Vietnam are not minor, with the most negative ones being the competition with Chinese goods on other markets beside the America one. The reason for this is the Yuan devaluation, leading to the decreasing price of Chinese goods on other markets and its direct competition with Vietnamese goods. 

Another thing that need to be brought into consideration is that as the Yuan is devaluated, a lot of Chinese poor quality or redundant goods will start flooding the Vietnamese market. In order to attain technological reform in the battle with America, China will find ways to push poor quality technologies and redundant technological goods to other countries to clean their own market. And Vietnam can be considered an advantageous destination for Chinese redundant goods. 

Therefore, Former Minister of Trade warned that Vietnam needed to be cautious about this strategy of China, because if Vietnam continues to prefer cheap goods, there is high possibility that it will become the “dump” for China, lowering the goods quality in the domestic market. “This is a major threat”, Truong Dinh Tuyen said. 

2. Be careful with the risk of being imposed tax from the US

According to the Former Minister of Trade, Vietnam also needed to be careful with companies taking advantages of the American-China tension to import Chinese goods to disguise them as Vietnamese goods. 

“It is very likely that some companies in Vietnam will import Chinese goods to masquerade as Vietnamese goods, or perform some machining then place the “Made in Vietnam” label on them. This is extremely dangerous, because if America finds out about this, they will impose tax on Vietnamese goods. They can not accept a market which exports Chinese goods masquerading as Vietnamese goods. Currently, it has not happened yet, but if it happens and Trump imposes tax on Vietnamese goods, then it will be direly serious”, Truong Dinh Tuyen commented. 

Also according to Truong Dinh Tuyen, if in 2018 Vietnam’s export to America increased by 47.5 billion USD, increasing by 11.43% comparing to the 41.6 billion USD figure of 2017, in the first half of 2019, export to America continued to grow rapidly with a total turnover of 27.5 billion USD, increasing by 27.4% over the same period last year. From the 6th place at the beginning of 2018, Vietnam has recently reached the 4th place out of the 16 countries exporting surplus to the US. 

However, recently, America said that Vietnam had impact on the foreign exchange market in a non-market manner, which is evident by the fact that we purchased a large amount of foreign currency (more than 2% of GDP). Since then, America has warned Vietnam of measures to restrict US businesses’ access to the Vietnamese market. 

Therefore, Former Minister of Trade said: ”Vietnam needs to change its export and import mechanisms, restrict import of redundant Chinese goods and increase import of American goods to maintain the good relationship. Vietnamese companies need to actively adjust the market structure in a more balanced manner.”

First, they need to reduce import from the Chinese market, especially the import of high-tech products, in order to increase import from the US. Secondly, after the EU-Vietnam Free Trade Agreement takes effect, companies need to promote export to the EU market instead of focusing only on the America market. This is a major potential that need to be taken advantages of. Meanwhile, they also need to firmly fight against commercial fraud, including origin fraud to avoid sanctions from the US and trade partners. 

According to statements of experts, the America-China trade conflict is going to prolong for a really long time. Even if America and China agrees on the negotiation in the next October, the possibility of positive signs is slim. This does not emerge simply from the unbalanced export and import between the two nations, but it lies in the context of the strategic competition which is currently happening on many battlefields and areas. In which, the global “Made in China” program created by China is considered to be a key element of this indefinite competition. 

>>> US-China trade war: Vietnamese businesses struggling

Compiled by Tri Thuc Tre - Translated by Vietnam Credit

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