Vietnam should be cautious about taking advantage of US-China trade war

More than 300 participants participated in the Vietnam-US Trade Forum 2019 with the theme ‘Global Supply Chains Movement – Opportunities to Promote Bilateral Trade and Investment’ held by the Ministry of Industry and Trade in association with the American Chamber of Commerce in Vietnam (AmCham Vietnam) on September 6 in Ho Chi Minh City.

Vietnamese enterprises have competitive edge when exporting processed food into the US market. (Photo: SGGP)

Vietnamese enterprises have competitive edge when exporting processed food into the US market. (Photo: SGGP)

One of the questions raised is that where Vietnam is standing in global supply chains and whether Vietnam is the country which benefits most from the current trade war.

According to deputy minister of Industry and Trade Do Thang Hai, the trade war between the US and China directly affects the economy of the two countries. However, as they are the largest economies in the world, their trade war will influence all other countries in the world, especially countries like Vietnam which has high economic openness while the US and China are two most important partners of Vietnam in trade and investment cooperation.

Mrs. Mary Tarnowka, executive director of AmCham Vietnam, also shared the same point of view. She said that no one can forecast when the trade war will end but its impacts have spread widely to several business sectors. In short term, Vietnam will possibly have many opportunities to study the US market and diversify supply chains.

US enterprises have also been seeking opportunities to cooperate with Vietnam to make up for a shortage of enterprises in China. AmCham Vietnam has been actively collaborating and increasing discussions to find ways to help Vietnam overcome difficulties in infrastructure and increase transparency in investment to make the country become an effective investment destination for US enterprises.

Discussing on possibility for movement of trade and investment, Mr. Tran Toan Thang, head of the World Economic Department of the Center for National Socio-Economic Information and Forecast under the Ministry of Planning and Investment, said that although information remained unclear for long term, foreign direct investment (FDI) capital into China would be still fairly high in short term. There was signs of FDI capital pumping into Vietnam in order to evade duties.

Meanwhile, Vietnam has various factors that support the movement, including favorable politics, stable macro-economy, low labor cost, potential domestic market with income increasing rapidly and many active free trade agreements which increase export opportunities. According to Mr. Thang, potential fields for investment in Vietnam consist of electrical and electronic devices, telecommunications, medical equipment, garment and textile, leather and footwear, supporting industries, automobiles, energy and equipment.

Besides FDI capital flow, the US-China trade war is creating a large market gap that Vietnamese enterprises are totally able to exploit in short term. For instance, Vietnamese enterprises will possibly increase exporting to the US 12 food groups, such as meat, crustaceans and fruits and vegetables as import tariffs are not very high and market share is not much, it will be a great opportunity for Vietnamese enterprises.

In the first six months of this year, two-way trade between the US and Vietnam had reached US$35.4 billion. Strong movement of global supply chains recently has helped Vietnam to make a leap from 12th place in 2018 to 9th place right at the beginning of this year in the list of countries exporting to the US. Vietnam also became the 27th largest market and the 16th largest trading partner of this country.

Giving comment on the development of the US-China trade conflict, Virginia Foote, vice chairwoman of AmCham Hanoi, co-chair of the Vietnam Business Forum Alliance, said that it is unpredictable that how long the trade war will last as China seems to be able to withstand for a while and the US’s election is about to come.

In fact, American people hope that the trade war will make China to change its investment policies and be able to control its cash flow. When discussing about the trade war, we should not only pay attention to tariff policy but there are also many other issues. The war aims to bring US enterprises back to the US, instead of from China to Vietnam or another country. Therefore, Vietnam is not the beneficiary of this war. Vietnam should be aware of that and be very careful.

According to Virginia Foote, Vietnamese enterprises need to be more active. Vietnam should develop areas, such as clean energy and supply chains using clean energy sources, to attract investment and interest of the US cooperation in long term. This is an opportunity but also a great challenge in both short and long term if Vietnam is not cautious.

By Thuy Hai – Translated by Thuy Doan

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