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How is Vietnam affected by the US-China trade war?

07:53 | 14/07/2018

VCN- If the US-China trade war escalates, it can have negative impacts on Vietnam’s imports and exports. However, Vietnam can also gain positive aspects from competing with Chinese goods in the world’s markets.  

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how does the effect on vietnam in the us china trade war Vietnam in midst of trade war among world powers
how does the effect on vietnam in the us china trade war

Export activities could suffer through major crisis due to the escalation of US-China trade war. Photo: N.H

Hence forward, the points from experts at the scientific forum, “2018 Macroeconomic report: Takes the front role initiative of the shock-maintaining macroeconomic stability”, held by Ho Chi Minh University of Banking, which took place on the 9th of July.

Mr. Nguyen Xuan Thanh, Director of Development, Vietnam Fulbright University, pointed out that as of now the US taxation policies on China has not directly impacted on Vietnam’s import and export goods, but has had an indirect impact because Vietnam is in the global production value chain.

There is a need to consider the impact of China’s export turnover to the US if the US imposes a tax rate of 25% on Chinese goods, and of which, how much does Vietnam’s turnover account for? Currently Standard Chartered Bank has studied this and assumed that if the commercial war stops import and export activities from China to the US, Vietnam's GDP will be affected 1%.

The economic expert Vo Chi Thanh, said that the direct impact by the trade war was not a big problem. Because, this matter did not completely stop import and export activities, it only it only caused a slight decrease. Currently, the US mainly levied tax on Chinese high-tech goods, these are globally manufactured items. This also affected the US’s major high-tech goods, so the US Government should take this into consideration.

However, Mr. Nguyen Tri Thanh also noted the possibility of shifting from a trade shock to a financial shock. In detail, many countries can devalue their domestic currencies to keep up with the competition, hence putting pressure on the global exchange rates. In addition, there is also the capital flow shifting caused by FED decisions. Experts stated that if the instability level increases, trade would reduce.

More specifically about impact of trade war, Mr. Thanh said that if trade war only stopped at a turnover of US$ 37 billion under the Decision on 6th July, then this would not cause a great impact. However, this was just the first shot showing that the US would not offer a concession to China. All are still in favor of both parties reaching an agreement to avoid further escalation on this war. Nevertheless, with president Trump’s strong attitude and resistance towards the matter, the turnover could reach US$ 200 to 500 billion.

how does the effect on vietnam in the us china trade war Vietnam in midst of trade war among world powers

While global trade policies take place among the world’s powerful economies, small economies like Vietnam have to ...

At that time, a series of Vietnam’s products would be levied with a higher tax rate and Vietnam would suffer some negative impacts. Accordingly, Vietnam’s exports to other countries would be affected, because imports become more difficult for those countries to the US, and so more difficult for Vietnamese exports to those countries, thereby Chinese goods would massively flow into Vietnam. However, there are positive impacts, particularly in competition with Chinese exports to the US, especially for labor-intensive goods.

By Nguyen Hien/Ngoc Loan