Vietnam Finds Itself Caught in Crossfire of U.S.-China Trade War

Date: Tuesday, October 29, 2019
Source: Bloomberg

Trade wars are making it harder for countries to distinguish economic friend from foe.

Take Vietnam, now the seventh-largest goods exporter to the U.S. The country has vaulted over long-time European suppliers such as the U.K., Ireland and France after starting the year in the 12th position.

Propelling the Southeast Asian nation’s rise has been a 34% surge in shipments to the U.S. through August, double the rate of increase in American products going in the other direction. Manufacturers are shifting production to places like Vietnam to avoid U.S. tariffs on Chinese imports — one of the more vivid examples of how trade wars are redirecting channels of goods and services.

But lately, the winners haven’t been able to celebrate for long. As exports surged, Vietnam’s trade surplus in goods with the U.S. swelled to $35.6 billion, up 38% from the same period in 2018, ranking just behind Germany. The Trump administration sees bilateral deficits like these as imbalances in need of a fairness check.

So it’s no surprise what happened to Vietnam:

  • In May, the U.S. Treasury Department added the country to its watch list for exchange-rate manipulation.
  • In June, President Donald Trump described Vietnam as “almost the single worst abuser of everybody” when it came to international trade.
  • In July, the U.S. slapped tariffs of more than 400% on steel imports from Vietnam, saying they originated in Taiwan and South Korea.

Add it all up, and Vietnam makes a good case study in Bloomberg’s just-released New Economy Drivers and Disrupters Report. The country with an economy the size of Louisiana’s ranks toward the bottom of the disrupters side of the index, indicating heightened exposure to risks as nations use tariffs and other tools of trade warfare. Vietnam will also face strains on infrastructure such as ports that will require both public and foreign investment.

The lesson for countries like Vietnam? Stay diversified with your export partners, because you never know when one of your friends might turn on you.

 

Read from origional source.

 

 

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