Impacts of the us–central trade war on vietnam's goods export: Opportunities and challenges

Nội dung text: Impacts of the us–central trade war on vietnam's goods export: Opportunities and challenges

1. IMPACTS OF THE US–CENTRAL TRADE WAR ON VIETNAM'S GOODS EXPORT: OPPORTUNITIES AND CHALLENGES Ph.D Nguyen Thi Thuy Hong – Pham Nguyet Anh – Dao Duc Duy Nguyen Trung Hieu – Nguyen Nhu Kien1 Abstract: The core object of this article is to clarify and analyse the trade war between The US and China then points out its implication to Viet Nam’s export situation. For this purpose, we focus on studying about the trade war and general export situation and reality of Viet Nam’s exporting to both US and China. It will be conducted in September and November 2020 by survey, assess and research the fluctuation in numbers of different economic expenditure in Vietnam; its mainly from the official websites and articles. This study covers the time–period from 2015 to 2020. The US–China trade war has been caused significant impacts on the economic situation the whole set of world economy. According to economic experts, the trade conflicts between the US and different countries in the world will have a multi–dimensional impact on the domestic economy, bringing opportunities and challenges for Vietnam. This article focuses on drawing the most general context of this trade war, thereby showing the effects the war has on both positive and negative aspects in the short–term, showing the opportunities as well as challenges to help Vietnam in exporting goods in the context of the US–China trade war. 1. GENERAL OVERVIEW OF THE US–CHINA TRADE WAR 1.1. The relationship between the US and China The United States and China are great trade and investment partners. The US–China economic relationship has grown significantly over the past three decades. Despite the development of commercial relations, the relationship between the world's two leading economies has become increasingly tense. The US announced that there would be concrete measures to reduce the bilateral trade deficit between the two countries, enforce US trade laws and agreements, and promote free and fair trade. The United States Chamber of Commerce (USTR) has issued a report accusing China of using non-economic measures to dominate US technology, including piracy of intellectual property or forced technology transfer when investing in China. That is the basis for the US to impose punitive tax packages on imports from China. 1.2. Causes of the trade war First, from an economic perspective, the US trade deficit with China has steadily increased over the past 20 years and reached $ 375 billion in 2017. Therefore, in an effort to gain weight By trading with China, the Trump administration has imposed import duties on goods from China, creating pressure for China to increase purchases of American goods, thereby reducing the trade deficit. In addition, the taxation will make the goods made in China imported into the US more or less losing their competitive advantage in price, forcing multinationals that are placing most of their factories in China to see consider relocating to the US. This helps support the Trump administration's return to America strategy and encourages domestic production. 1 Institute of International Trade and Economics. 419
2. Second, many industrial policies of China was formed and executed: Planning the development of science and technology in the medium and long term, 2006–2020 shows ambition in modern the economic structure of China; The “Made in China 2025” plan is also launched with a focus on developing high–tech industries with 70% of raw materials produced in the domestic sector. The Trump administration does not like this scenario, especially in the context of reports that Chinese businesses are thriving in unfair ways. Third, reducing the trade deficit, reestablishing fair game rules when doing business with China is one of the goals Mr. Trump made since running for President in 2016. Mr. Trump kept his promise to the voters who support them will create a great advantage for the Republican party in the upcoming midterm elections. 1.3. Progress of the US–China trade war The trade war between China and the US kicked off on 22 March 2018, when US President Donald Trump vowed to impose $50 billion in tariffs on Chinese goods, to avert what it considers unfair commercial practices and intellectual property theft. In April, President Trump imposed tariffs on steel and aluminum imports from China, Canada, and countries in the European Union. Since May 2018, the US and China have continuously introduced tit-for-tat policies to impose tariffs on many of each other's goods and now each side has made three tax increases on the other's goods. The peak was in July 2018, US President Donald Trump continued to announce the policy of imposing additional duties on $ 200 billion of goods imported from China – a dramatic escalation. In addition, President Trump also threatened that if China continues to retaliate, the possibility of tariff barriers will increase to $500 billion USD and even the US does not hesitate to tax all Chinese goods. On the contrary, in response to the US, China also imposes similar tariff barriers on US goods, but the increase of Chinese tariffs on US imports is not strong enough to respond due to the imposition of China taxes up to 85% of goods imported from the US. China is now turning to some other non–tariff retaliation measures such as strict customs controls, strict inspection of up to 100% of imported shipments, or bureaucratic administrative procedures for goods. America. They are also silently stopping the licensing of US businesses doing business in the country in the areas of finance, banking, insurance, and property management. At the same time, China also uses the method of devaluing the yuan as the ultimate weapon. During the last week of July 2018, the CNY has depreciated quite strongly against the USD, nearly 8% and is expected to continue to decline. 2. IMPACTS OF THE US–CHINA TRADE WAR ON THE GLOBAL AND VIETNAMESE ECONOMY 2.1. The impacts of US–China trade wat to the global 2.1.1. The risk of global recession Not only do these moves affect the two leading economies in the world, but also other Asian countries. The DBS report shows that Korea, Malaysia, Taiwan, and Singapore will be the most at risk economies in Asia because of the US–China trade war due to their high trade openness and Involved heavily in the supply chain. GDP growth of Korea may lose 0.4%. This figure for Malaysia and Taiwan is forecast at 0.6%, while Singapore is 0.8%. In the long run, the biggest negative consequence of the trade war is the slowing of the global economy. The US–China trade war is sure to slow down the growth rate of the world economy. This will lead to a decrease in the demand for Vietnamese exports. 420
3. 2.1.2. Causes of disorientation of businesses The tense trade war amidst the weak global economy, plus a series of other issues such as technology fever subsides, auto demand, especially in China, slowing down means that It is difficult for companies to predict business prospects. In the worst–case scenario of prolonged trade tensions and tariffs imposed, Morgan Stanley forecasts that China will loosen fiscal policy equal to 0.5% of gross domestic product. (GDP) and credit growth. For the Fed, a 0.5%age point rate cut could be made. 2.2. The impact of the US–China trade war on Vietnam a) The short–term positive impact * Increase in exports Vietnamese enterprises have the opportunity to expand their market share in the US because the number of Chinese products is affected by the 10% tax rate which is quite similar to the key export products of Vietnam to the US. Therefore, it is expected that some Vietnamese industries can directly benefit. Currently, the textile and garment market has had the first positive signals when three major US companies that have a tradition of outsourcing in Vietnam, Columbia, Nike, and Adidas, are showing signs of gradually withdrawing their orders from China move to Vietnam. * Promote foreign direct investment. In addition to increasing exports, attracting foreign direct investment (FDI) is also an opportunity and a trend to shift investment from China to Southeast Asian countries, including Vietnam, due to increasing costs and risks when doing business in China. Vietnam has abundant labor resources, cheap in the processing sector – manufacturing, and hrea Vietnam now has allowed the establishment of enterprises with 100% foreign capital. In the short term, Vietnam's trade is not expected to be affected much because most of the US industries and sectors that impose high tariffs on China are not the Vietnamese sector that engages in exporting inputs to China. However, if the trade war escalates, the US will impose some restrictions on Chinese goods, affecting some goods of the same type as Vietnam. In the long run, the spillover effects can be very large, making it difficult to quantify the effects. b) The negative impact in the long term * Negative impact due to trade diversion First of all, the risk comes from the fact that China needs to deal with a large number of congested goods that cannot be exported to the US. When tariffs are imposed by the US, China may have devaluation policies, pushing goods to surrounded countries, including Vietnam, to reduce its dependence on the US and maintain export turnover. If the trade war with the US continues, Chinese businesses that move production to Vietnam will compete directly with Vietnamese enterprises in purchasing raw materials and labor as well as taking advantage of incentives. origin of goods in free trade agreements that Vietnam has and will sign. In addition, the financial and monetary environment will have unfavorable developments: the decline in securities prices, the threat of VND devaluation in the face of the pressure of increasing US dollar interest rates and depreciating the Yuan. This means the ability of the foreign direct investment sector to shrink production and exports, because of exchange rate losses when investing in Vietnam. If forced to increase the exchange rate, ie devalue VND, to increase FDI attraction, the pressure of cost inflation pushes and the monetary inflation in the country appears. 421
4. In addition, the value of exports from Vietnam to China decreased due to China's increased localization. China is expected to turn the trade conflict into an incentive to encourage an increase in the localization of imports to replace both finished products and intermediate materials. In particular, if the trade conflict gets worse and worse, the Yuan tends to depreciate further while the VND remains stable against the USD, making it harder for Vietnamese goods to compete with Chinese goods both in the domestic market. * Risk of counterfeit displacement and trade fraud due to investment diversion This is a form of trade fraud, if Vietnamese businesses are not cautious, they will have disadvantages, causing Vietnamese businesses to lose market share and increase the risk of being "unfairly punished" from the US in exporting "official" goods to the US. The steel industry was in the past a great lesson for Vietnam. In 2016, when China was imposed by the United States to impose anti–dumping subsidies from the United States with a tax rate of 266% on steel products. Immediately after that, stainless steel from Vietnam to the US is increasing from 2 million USD/year to 80 million USD/year, cold–rolled steel increased from 9 million USD to 215 million USD/year. The US side believes that 90% of Vietnamese steel transported through the US originates from China. And so cold–rolled steel Vietnam will be subject to US tax rate of 531%, while the corrosion–resistant steel is 23%. This also affects the credibility of enterprises in Vietnam, and fall into the sights of America, which led to the goods other by Vietnam produce also will be higher US taxes. * Negative impacts on the environment and social security of Vietnam The wave of Chinese businesses moving to Vietnam could turn the country into an outdated Chinese technology landfill that is being dumped, polluting the environment like coal–power plants (Vinh Tan) and steel mills (Formosa). In addition, there is a possibility that a large number of Chinese businesses will go bankrupt, causing part of the workforce to lose their jobs and move to border areas to make a living, which will cause concerns about social security for Vietnam. 3. OPPORTUNITIES AND CHALLENGES FOR VIETNAM'S MERCHANDISE EXPORT IN THE CONTEXT OF THE TRADE WAR 3.1. Opportunities that Vietnam needs to seize First, the US–China trade tension is considered an opportunity for Vietnamese businesses to enter these two big markets when the two sides reject each other. For the US market, a large amount of apparel, footwear, sporting goods, children's toys, furniture, and furniture originate from China and when these items are restricted from being imported. That is a good opportunity for Vietnam to dominate the US market share. Second, the US–China trade war opens up opportunities for Vietnam to welcome investment from abroad. Foreign direct investment FDI inflows will tend to flow out of China to Southeast Asian countries when the relationship between China and the US becomes strained because investors always need a stable environment. Which, Vietnam has a large and cheap labor force; Moreover, Vietnam still allows the establishment of enterprises with 100% foreign capital. Third, when Chinese goods are difficult to export to the US, this country will boost exports to other countries, including Vietnam. This is an opportunity for Vietnamese businesses to compete with Chinese goods. 3.2. Challenges that Vietnam has to face First, if the investor China in trouble in the water, they will boost foreign investment. Chinese enterprises can increase investment in Vietnam and hide Vietnamese products to avoid US tariff 422
5. barriers. This promotes FDI inflows from China to Vietnam, but the quality of investment from Chinese enterprises still has many problems that require us to choose and distinguish carefully when receiving capital flows. this. Vietnam may even be exposed to risks because the US may pool the origin of Vietnam's goods with China. Second, with the dense tariff barriers as well as the economic protectionist policy of President Trump with the policy of "America first", the inflow of US investment abroad may be sucked back to the US instead because it is pouring into developing economies like the past time, especially when the US may impose additional tariff barriers on economies other than China. As a result, FDI inflows from the US into Vietnam may decline. Third, with Chinese products having difficulty in selling in the US, many Chinese companies will need to find new markets to consume their goods and the nearest market is Vietnam. At the same time, the sharp depreciation of the Yuan makes Chinese goods cheaper to compare with Vietnamese goods. This makes Vietnam the goods will have to compete more strongly, causing inflows of FDI into Vietnam market decline. In addition, the devaluation of the Chinese Yuan will increase Vietnam's trade deficit with China. Fourth, many factors indicate that Vietnam's inflation risk could be higher than expected. The US Dollar may continue to appreciate further in the near future; the environmental protection tax on oil stains will increase from the beginning of 2019; In addition, the pressure to increase fees in the health and education sectors due to the tendency of autonomy and a sharp cut in the budget for recurrent expenditures in these sectors will pose risks of difficulty controlling inflation. Fifth, the fact that China continuously devalues the yuan in order to deal with the US in the trade war has affected Vietnam's exports quite a lot. When China devalues the RMB, the competitive pressure on export goods between China and Vietnam is increasingly fierce in markets outside the US; on the other hand, exporting Vietnamese goods to China will be more difficult because the prices of goods in the Chinese market are cheaper than exported goods from Vietnam. 4. CONCLUSION Trade tension is considered one of the biggest risks to global economic growth. Right now, the trade war between the US and China is at the heart of economic tensions around the world. The article presents an overview of the trade conflict developments between the two world powers, the US and China, focuses on analyzing the impact of the conflict on Vietnam's foreign trade, and then points out the necessary opportunities capture as well as the challenges that Vietnam has to face. On the basis of information gathered about the trade war between the two great powers, if you know how to make good use of the opportunity, this tense context will be a big–ticket for Vietnam to reach closer integration with other countries and other developed economies in the region. REFERENCES 1. Daniel Ten Kate, John Boudreau, and Nguyen Dieu Tu Uyen (Bloomberg, 12 September 2018), Vietnam's Communist Free Traders See Positives in Trump Tariffs. Available at –09–12/vietnam–s–communist–free–traders– seepositives–in–trump–tariffs. 2. Eustance Huang (CNBC, 2018), Vietnam could be a 'winner' from the US–China trade war. Available at –could–be–a–winner–from–the–us–chinatrade– war.html. 423
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