VieamNet Bridge - Vietnam is expected to be seriously affected if US policy restricts imports from China to protect domestic production.

Donald Trump, who won the election to become the 45th US President, is well known for his protectionist policy. 

Trump suggested applying import tariffs of up to 45 percent on products from China, 35 percent from Mexico and 15-45 percent on products from countries with signs of currency manipulation. 

Though Trump has only mentioned re-negotiation of trade terms with Mexico and China, analysts warned that protectionism would also be applied to other trade partners with which the US has a trade deficit, including Vietnam.

The US was the biggest export market for Vietnam in the first nine months of the year; it  consumed $28.3 billion worth of products. The US is the biggest consumer of Vietnam’s textiles & garments ($8.6 billion), footwear ($3.3 billion), phones ($3.1 billion) and computers & electronics ($2.1 billion).

According to Bao Viet Securities, Vietnam has been maintaining a trade surplus with the US since 2006. In 2015, the trade surplus reached $25 billion. With a tough stance on local protection, Trump may raise tariffs on imports from all trade partners. If so, Vietnam would bear adverse effects.

The big gaps in import tariffs to be applied to different trade partners would encourage arbitrage activities. As a result, products from countries with high tariffs, such as China, would try to penetrate the US market through third countries, such as Vietnam.

The US on November 7 officially launched an investigation on the accusation that Chinese steelmakers had exported products to the US through Vietnam to avoid taxes. 

Vietnam is expected to be seriously affected if US policy restricts imports from China to protect domestic production.

Observers warned that the US, in an effort to prevent trade fraud, is likely to raise taxes on products from Vietnam as well.

Bao Viet’s analysts have also warned of the risk that Chinese manufacturers, who face barriers entering the US market, would try to sell their products in other markets, including in Vietnam. 

It is highly possible that Chinese manufacturers would bring their products to Vietnam to compete directly with Vietnamese manufacturers, or increase competition in third countries where both China and Vietnam export products.  

Experts warned that once trade wars break out, foreign direct investment (FDI) would decrease dramatically as a result of international trade interruption and protectionism. As an economy which relies on import/export activities and investments, Vietnam will bear negative impacts.

Minister of Industry and Trade Tran Tuan Anh, talking to the press on November 10, also said that Vietnam’s exports may be affected by a Trump presidency.


Kim Chi