The US-China trade war is escalating as the 10 percent tax imposed on $234.8 billion worth of Chinese exports to the US will be raised to 25 percent from January 1, 2019. While the war has brought negative effects to manufacturers and consumers of both countries, it has benefited other economies.

A study by Massimiliano Cali, an economist of the World Bank, pointed out that if the taxation is implemented as scheduled, US imports from China would decrease by $68.6 billion, or 13.4 percent of total imports from China and 3 percent of Chinese total export turnover.

If this happens, the second largest economy would lose $41.4 billion, or 0.3 percent of GDP.

The study found that Vietnam may become the new supplier of seafood, travel bags, camera and woodworks to the US instead of China. 

The potential replacement of Chinese exports to the US is worth up to 4.4 percent of Vietnam’s GDP. The figure shows Vietnam may be the biggest beneficiary from the US-China trade war.

According to Nguyen Xuan Thanh from Fulbright Vietnam University, Chinese garments and footwear were not subject to taxation by the US in all the last three announcements. 

Meanwhile, these are also key export items of Vietnam. If the trade war continues to escalate and the US imposes high tax on the remaining $267 billion worth of Chinese products, Vietnam would have the opportunity to boost garments and footwear products to the US as well.

US taxation is believed to have the biggest impact on electrical & electronic appliances. These are not Vietnam’s key export items.

As Chinese goods cannot enter the US market because of high taxes, they will find the way to penetrate into Vietnam, thus affecting the local industries. These include interior products, footwear, briefcase and handbags, especially chemicals and plastics. 

Pham Sy Thanh, director of the Chinese Study Center under the Vietnam Institute for Economic and Policy Research (VEPR), said as the US interest rate has increased greatly, hard currencies have appreciated, while the currencies of emerging countries have depreciated. Vietnam will also bear the influence despite its high forex reserves valued at $63 billion. 

According to Tran Du Lich, deputy chair of the Vietnam International Arbitration Center (VIAC), the PM has stated Vietnam will pursue policies that maintain stability and Vietnam will not ‘put the cart before the horse’ for monetary policy. Stabilizing the exchange rate, interest rate and macro economy will still be priorities.

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