Statistics show that with the United States raising tariffs on Chinese products to reshape the global supply chain, Vietnam’s import trade with China has surged. Experts analyze that Chinese companies are exporting products to the United States through Vietnam to avoid high tariffs.
On Tuesday, May 14, the Biden administration announced imposing high import tariffs on certain Chinese products. Seven major categories of products will be affected, including steel and aluminum, semiconductors, batteries, critical minerals, solar panels, port cranes, and medical products.
Since 2018, successive U.S. governments have launched trade wars and technology wars with China to combat the Chinese Communist Party’s non-market trading practices and to exclude China from high-tech supply chains.
As the U.S.-China trade war escalates, Vietnam’s trade with the United States has surged, leading to a rapid expansion of the trade imbalance between the United States and Vietnam.
Last year, Vietnam’s trade surplus with the United States reached nearly $105 billion, 2.5 times that of 2018 when the Trump administration first imposed high tariffs on Chinese goods.
Currently, Vietnam ranks fourth globally in trade surplus with the United States, only behind China, Mexico, and the European Union.
According to a report by Reuters, after examining trade, customs, and investment data from the United Nations, the United States, Vietnam, and China, a symbiotic relationship in trade between China, Vietnam, and the United States was discovered. Preliminary estimates by the World Bank and six economists and supply chain experts confirmed this.
The report shows that Vietnam’s exports to the United States and imports from China have a close correlation, with the import volume from China and export volume to the United States in recent years fluctuating in tandem.
Preliminary estimates provided by the World Bank to Reuters reveal a high correlation of 96% between imports from China and exports to the United States, higher than the 84% before Trump took office as President.
When President Biden visited Hanoi last year, the relationship between the United States and Vietnam was elevated to a “comprehensive strategic partnership” for the first time. Vietnam is actively seeking market economy status from the United States.
Darren Tay, Chief Economist at research institution BMI, stated that the surge in Chinese products imported into Vietnam corresponds with the increased exports from Vietnam to the United States, which may be seen by the U.S. as Chinese companies using Vietnam to evade additional tariffs on their goods. He pointed out that this could lead to the imposition of tariffs on Vietnam post the U.S. election.
Last year, the value of goods imported by the U.S. from Vietnam exceeded $114 billion, more than double the amount when the U.S.-China trade war began in 2018. Meanwhile, since 2018, U.S. imports from China have decreased by $110 billion.
Hung Nguyen, a supply chain expert at RMIT University Vietnam, mentioned that in key industries such as textiles and electrical equipment, “over 60% of the reduced trade with China has been replaced by Vietnam.”
Statistics reveal that most components of products exported from Vietnam to the United States originate from China.
Data from the Asian Development Bank shows that around 80% of electronic products exported from Vietnam to the United States in 2022 were assembled using imported components.
According to Vietnam’s published data, one-third of its imports, mainly electronic products and components, come from China, although further details were not provided.
In a report, the Organisation for Economic Cooperation and Development pointed out that in 2020, around 90% of intermediate products imported by Vietnam in the electronics and textile industries were subsequently re-exported, surpassing levels from a decade ago and significantly higher than the average of industrialized countries.
Current data reflects the interdependence of trade between China, Vietnam, and the United States. In the first quarter of this year, U.S. imports from Vietnam totaled $29 billion, while Vietnam’s imports from China amounted to $30.5 billion, consistent with previous quarters and years.
Analysts point out that despite persistently high inflation rates, the U.S. White House has remained silent on Vietnam’s substantial trade surplus. However, this situation may change after the November election.
Nguyen Ba Hung, Chief Economist at the Asian Development Bank’s office in Vietnam, stated, “After the U.S. election, policies towards Vietnam could change regardless of the election outcome.”
The surging trade between China and Vietnam also reflects increased investment in Southeast Asia’s manufacturing hub, as some companies relocated factories from China to Vietnam.
Many of these manufacturers are Chinese companies. They have increased investment in new factories in northern Vietnam but remain heavily reliant on domestic supply chains.
The U.S. Department of Commerce found in its investigation of solar panels last year that in some cases, products labeled as “Made in Vietnam” did not have added value in Vietnam.
Currently, the U.S. Department of Commerce is conducting a separate investigation on aluminum cable products and a second investigation on solar panels suspected of unfair subsidies.
Another reason for the U.S. conducting trade reviews on Vietnam is the importation of products from China into Vietnam that involve Xinjiang products, violating U.S. sanctions against human rights violations by the Chinese government.
Xinjiang is a major producer of cotton and solar panels in China, key export products for Vietnam. Last year, Vietnamese exports of cotton garments and solar panels accounted for about 9% of its exports to the United States.
According to U.S. Customs data, in terms of value, Vietnam is the country with the most refused shipments into the U.S. due to the importation of forced labor products from Xinjiang Uighur.
Last year, Vietnam’s raw cotton imports from China decreased by 11% to 214,000 tons, but still doubled the amount imported in 2018. China exported over $1.5 billion worth of cotton garments to Vietnam, surpassing nearly $1.3 billion in 2022.
Meanwhile, U.S. imports of cotton garments from Vietnam decreased by 25% last year to $5.3 billion, indicating that this may not include all cotton products imported by the U.S.
Hung Nguyen, an economist at RMIT University in Melbourne, explained that the reason for the decline in U.S. imports from Vietnam last year was due to Vietnam surpassing China as the main exporting country of products impacted by the Xinjiang ban.
(This article references reports from Reuters)