Vietnam exports the most products to the US and China imports the most products.

In the first half of 2022, Vietnam was the seventh largest trading partner of the US with a total import-export turnover of US$70 billion, up 30.8% over the same period in 2021 and accounting for 2.7% of the US total export turnover. Vietnam's exports to the US reached $63.9 billion while imports from the US were $6.1 billion, up 6.1% year on year.

Vietnam had a trade surplus with the US of $57.8 billion and ranked third among the countries with the largest trade surplus with the US (after China with $200.1 billion and Mexico with $63.4 billion) last year. 

In the first seven months of 2022, Vietnam had a trade surplus with the US of $49.1 billion (up 29.6% over the same period in 2021).

According to the Ministry of Industry and Trade, the main reason for the trade surplus with the US is from the complementary nature of the two economies.

Another important reason is intense global trade since 2018, which has shifted the supply chain to Vietnam, contributing to a strong boost in Vietnamese exports to the US.

Risks

While exports to the US have set new records over the years, Vietnam's trade deficit with China has been increasing. In January-August 2022, Vietnam had a trade deficit of $47.8 billion, up 21.9%, mainly raw materials, equipment and machinery for domestic production.

The trade surplus between Vietnam and the US has caused the US side to raise the issue of balanced trade relations many times, especially during the time of US President Donald Trump. At that time, Vietnam was under pressure from the US threatening high tariffs and sanctions.

With great diplomatic efforts, in early 2021, the US Trade Representative (USTR) announced that it had not proposed that the US Government impose taxes and sanctions on Vietnamese exports (as the US did with China).

“The final conclusion of USTR not to impose taxes on exports from Vietnam in the two cases related to currency and timber investigations has had positive implications for bilateral economic-trade relations, business, and the investment environment in Vietnam and the multifaceted cooperation relationship between the two countries, showing the drastic direction of the Prime Minister on the overall strategy of handling the case and measures to solve it, as well as the efforts of ministries, agencies, associations and businesses in both Vietnam and the US, avoiding the possibility of the US imposing punitive tariffs on Vietnamese goods,” the Ministry of Industry and Trade assessed in a recent report to the National Assembly.

However, these risks still exist if Vietnam does not have effective measures against goods-origin frauds and dumping.

As of April 2022, the US was still the country that initiated the most trade remedy investigations against Vietnam with a total of 50 cases, accounting for 22.5% of the total number of trade remedy investigation cases with Vietnam’s export goods. The investigated items are diverse, ranging from steel, timber, seafood, textiles and tires, to honey, foam mattresses, and woven bags.

The US has recently increased investigations regarding tax avoidance of Vietnamese exports. The investigated items have a large export turnover such as plywood (about $357 million); solar cells (about $1.4 billion); and wooden cabinets (about $2.7 billion).

Meanwhile, the Vietnamese Ministry of Industry and Trade has acknowledged that because the US has not recognized Vietnam as having a market economy, in anti-dumping investigations, the US Department of Commerce uses the expenses of a third country with a similar economic development level as a substitute value, so it does not accurately reflect Vietnam's production practices.  As such, Vietnamese enterprises in many cases would be subject to higher tax rates.

Vietnam in the time to come will have to strictly control the origin of goods, and avoid being targeted as a "tax avoidance" site for Chinese goods entering the US. On the other hand, Vietnam should also consider opening the market for many US products to Vietnam to solve the trade imbalance.

Luong Bang