US economy

Vietnam emerges as beneficiary of trade war


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Vietnamese companies are emerging as winners in the trade war between the US and China, according to a survey of US and Chinese businesses.

Companies from both countries that took part in the survey, published on October 29 by the Guangzhou-based American Chamber of Commerce in South China, said that as a result of the trade conflict they have been losing market share, especially to companies from Vietnam.

Chinese companies also reported losing sales equally to companies from India, the US and South Korea. For US companies, by contrast, Germany and Japan were the next keenest rivals.

Since July, US president Donald Trump has imposed punitive tariffs on $250bn worth of annual Chinese imports to push demands for Beijing to change elements of its industrial policy. Chinese leaders have responded with tariffs on $60bn worth of US exports.

A majority of both US and Chinese respondents to the AmCham survey reported feeling a negative impact from the tariffs, though the share of US companies agreeing with this was significantly higher than that of their Chinese counterparts. The respondents said a reduction in profits was the main effect of the trade conflict, though only 20 per cent of the 219 participating companies said the impact on sales was greater than $10m.

Nevertheless, with the potential for more tariffs looming, most participants in the survey, which was conducted between September 21 and October 10, said they were looking at shifting production, assembly or sourcing of supplies to third countries, with south-east Asia as the leading choice.

Some companies are already putting such plans into motion. Panasonic, for example, is moving production of car electronics from China to Thailand, Malaysia and Mexico. China’s GoerTek, which assembles wireless earphones for Apple, has notified suppliers that it intends to relocate some of its production to Vietnam. Chinese polyester producer Zhejiang Hailide New Material is investing $155m in a factory in Vietnam with an eye to exports to the US.

Close to half of the companies in the AmCham survey reported feeling a trade impact beyond tariffs from the US-China confrontation. For example, 44 per cent said customs clearance for their shipments had slowed, while 38 per cent said inspections had increased and that approval for licences was taking longer.

The survey largely echoed the findings of a similar one conducted a few weeks earlier involving about 430 members of the American chambers of commerce in Beijing and Shanghai. The biggest difference was that nearly two-thirds of respondents to the earlier survey said they had no plans to shift manufacturing out of China despite the new tariffs.

This article is from the Nikkei Asian Review, a global publication with a uniquely Asian perspectives on politics, the economy, business and international affairs. Our own correspondents and outside commentators from around the world share their views on Asia, while our Asia300 section provides in-depth coverage of 300 of the biggest and fastest-growing listed companies from 11 economies outside Japan.

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Mr Trump and Chinese president Xi Jinping are expected to meet this month on the sidelines of the G20 summit in Argentina, but few expect a breakthrough soon on the trade conflict.

In the AmCham South China survey, more than half of the participants said they expected the impact of the trade war to last for at least another year. Of the US participants, 54 per cent said the Trump tariffs would not deliver any benefit to their company or result in a better business environment. Among Chinese companies, the most common view of the tariffs was that they would “speed up China’s economic transformation and upgrading”.

The Asian Development Bank recently trimmed its 2019 growth forecast for emerging Asia to 5.8 per cent from 5.9 per cent due to the trade conflict, while noting that it would not hurt all countries evenly “as trade is redirected within global supply chains to economies producing similar goods, benefiting in particular south-east Asia.”

A version of this article was first published by the Nikkei Asian Review on October 29. ©2018 Nikkei Inc. All rights reserved.

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