Enterprises need to be proactive in the impact of US-China trade war

VCN – Experts recommend that Vietnamese enterprises, especially  exporters must take the initiative in responding to the impacts of the US-China trade war.
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Many of Vietnam's electronic products exports are declining due to the impact of US-China trade war. Photo: Nguyen Hue.

According to the Department of Industry and Trade of Ho Chi Minh City, the US-China trade war has had an impact on the export activities of some commodity groups. Typically, the group of computer products and electronic components (the group accounts for the largest proportion in export turnover of Ho Chi Minh City: 30.16%) has a much lower growth rate than the same period in 2017, only increasing by 17.6% (same period increased 29.6%). This group of goods is a group that the US impose the most taxes on imports from China (accounting for 24.6%). These products in Vietnam in general and Ho Chi Minh City in particular are produced and exported mainly by foreign-invested enterprises, whose input source is imported mainly from China (they are mainly Chinese C/O), so they are also affected by the US tax imposition.Export turnover decreased

The statistics also showed that due to the impact of trade war, in general, the main export markets of Ho Chi Minh City for electric and electronic machinery and equipment decreased compared to the same period. Specifically, Malaysia decreased by 45.7% and United States decreased 4.8%. This is the first time in 10 years the export turnover of the city into the United States has decreased.

Experts predict the strained relationship between the United States and China would increase the pressure of imported goods to Vietnam. The Chinese goods flooding into Vietnam increased pressure on domestic producers because the Chinese goods have a competitive advantage in price. At the same time, when China does not export goods to the US, it would have to promote domestic consumption, reducing the demand for imports. These adjustments might increase Vietnam's trade deficit with China.

Increase risk of trade violation proceedings

According to experts, one of the most obvious impacts of the US-China trade war on Vietnam's export goods is that Vietnam's exports are subject to increased trade scrutiny proceedings because Vietnam is close to China. It is easy to be suspected of counterfeiting origin to avoid tax when exporting to the United States. Vietnam's export goods to the US tend to increase to compensate for the shortage of Chinese goods, so the risk of being investigated by the United States is huge. According to Mr. Diep Thanh Kiet, Vice Chairman of Vietnam Leather and Footwear Association, the risk of being investigated by the US due to the impact of the US-China war would be one of the challenges for enterprises within the industry.

A representative of the Department of Trade Protection of the Ministry of Industry and Trade - Mr. Ngo Thang Trung also said that the US-China trade war was increasing the global protection trend. The goods would tend to spill over to a third countries who can also apply trade measures. After the United States imposed sanctions on steel imports from China under Act 232, many other countries also applied safeguard measures to steel products. Vietnam has recently been investigated in 14 cases of trade violations on anti-dumping by the US, of which 13 cases were sued simultaneously with Chinese proceedings. In addition, there are 6 cases of US anti-subsidy investigations on Vietnamese export goods that are applied simultaneously to Chinese goods.

Particularly noteworthy is that the investigation of trade violation by the US focuses not only on the products with large export turnover but also the products with negligible export turnover. In addition, in the process of investigating, the United States always apply adverse mechanisms or use domestic laws of the United States, so the risk of being imposed trade violation tax on Vietnam's export goods is very large.

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“Although there may be some opportunities to benefit from increased export market share and investment attraction, the risks and challenges from the trade war are huge and unpredictable. Vietnamese enterprises must always follow, monitor, analyze and forecast to offer different response scenarios. In particular, the enterprises need to thoroughly understand principles of trade violations to actively adapt to the risk of being investigated which can occur at any time.” the experts stressed.

By Nguyen Hue / Binh Minh

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