It matters how you start, but it really matters how you finish
The U.S.-China trade war's rhetoric and ramifications have affected its economies but also nations worldwide. The effects on Vietnam though, shine out. Rather than negatively impacting Vietnam, the Southeast Asian nation has flourished.
Vietnam has an early lead – the Southeast Asian nation declared as "the biggest winner" in the ongoing tussle between Washington, D.C. and Beijing. Benefiting from tariffs on China, with operations, and supply chains shifting to Vietnam, our fifth SEA View article considers how long this success will last.
Our Hogan Lovells' authors, with jurisdictional, regulatory, and industry perspectives stemming from all over the globe debate if the U.S. tariffs that created the growth in Vietnam could also snatch it away.
Since the U.S.-China trade conflict started in earnest in the middle of 2018, trade experts on both sides of the Pacific declared Vietnam as the "biggest winner" of the Sino-American trade war. Many companies are moving (or have moved) their operations or shifted their supply chain to Vietnam in response to the tariffs on China. The swing in supply chains has created measurable economic gains in Vietnam, both in terms of employment and Gross Domestic Product (GDP) growth.1 The latest round of 10 percent tariffs announced on 1 August 2019 on Chinese goods, combined with the subsequent retaliation by China, positions Vietnam to continue to benefit from the ongoing trade war in the near term.
Unfortunately, evidence of trade fraud in the form of "rebranded" or "transshipped" goods of Chinese origin entering the United States through Vietnam to avoid the Chinese tariffs has led the Trump Administration to start slapping tariffs on products from Vietnam. The Trump Administration could implement additional tariffs if Vietnam does not crack down on these practices. These tariffs could threaten the growth of Vietnam's export-led economy. Companies that are thinking about shifting their supply chain to Vietnam or making other investments based on the short-term effects of the trade war should keep in mind that the U.S. tariffs that created the growth in Vietnam could also take it away.
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Footnote
1 Vietnam GDP Grows on Trade War Gains, Financial Times, June 28, 2019, available here
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