Vietnam in midst of trade war among world powers

US protectionism

On January 22, 2018, one year after withdrawing from TPP, US President Donald Trump once again showed his determination to follow a protectionism policy by imposing protective duties on two imports – washing machines and solar panels.

The move was made in the context of the rapid growth of the solar panel manufacturing industry, expected to have a value of US$60 billion globally by 2022, according to Zion Market Research.

The new industry has become the focus of protectionism pursued by the US, China and India, the three major rivals in the market.

India tried to apply measures to restrict imports of solar panels from the US, but later had to remove them as they violated WTO rules. The US criticized China for providing subsidies to domestic solar panel manufacturers.

The US decision on imposing a protective duty is the next step in the war among powerful economies to scramble for market share and production advantages.

As for washing machines, the protective duty is the latest in the prolonged trade war.

Whirlpool, the US manufacturer with 40% of the US market share, accused Samsung and LG of dumping their products in the US market in 2011. This led to the US government’s decision in 2013 to impose an anti-dumping duty on imports from the Republic of Korea and Mexico, where Samsung and LG have their production bases.

The two manufacturers then relocated their production bases to China to avoid the duty. Whirlpool once again successfully persuaded the US administration to impose an anti-dumping duty on imports from China in 2016.

Samsung and LG, which anticipated the US move, relocated their production bases to other countries, including Vietnam.

What about Vietnam?

Vietnam is one of the economies most affected by the US decisions.

The washing machine exports to the US began soaring in 2016, when LG and Samsung factories opened in Vietnam. A report of the US International Trade Commission showed that Vietnam exported US$537 million worth of washing machines to the US in the first 11 months of 2017, accounting for 30% of the market share.

The problem is that though the products are made in Vietnam, Vietnamese enterprises do not have opportunities to join the production chains. As multinational factories relocate regularly to avoid tax, the operation of the factories have little relations with the local economic ecosystem.