U.S. imports from Vietnam jumped 34.8 percent yr-on-year in the first nine months of this year, according to IHS Markit consultancy. By comparison, over the same period U.S. imports from mainland China shrank by 13.4 percent.
The growth in exports to the United States has rendered Vietnam one of the trade war’s biggest beneficiaries.
Computers, telephone equipment and other machinery are Vietnam’s fastest rising export categories to the U.S.
No one expects Vietnam to replace China as the world’s biggest exporter, but it certainly appears that the Southeast Asian country is taking some of China’s business with the US.
In the first nine months of this year, U.S. imports from Vietnam jumped 34.8% year on year, accelerating from a 5.8% gain in all of 2018, according to a consultant IHS Markit Thursday report. In comparison, in the January-to-September period, U.S. imports from mainland China shrank 13.4 percent year-on-year, the note also said.
Tariffs were a major reason behind the decline in U.S. imports from China, Michael Ryan, Associate Director of Comparative Industry Services at IHS Markit, said that, who wrote the report.
He added that computers, telephone equipment and other machinery are the fastest growing export categories of Vietnam to the U.S.
According to the U.S. Trade Representative, these goods were among the top imports from mainland China, Mongolia and Taiwan in 2018. This indicates this Vietnamese exports to the U.S. of those goods may have replaced the flow reduction between China and America.
Vietnam is often called one of the trade war’s largest beneficiaries due to increased exports to the United States. Moreover, Southeast Asian country has seen a jump in foreign direct investment from manufacturers seeking to bypass high tariffs between the U.S. and China.
But the U.S. hasn’t invested in Vietnam in a big way, Ryan said. He pointed out that American investment in Vietnam accounts for only 2.7 percent of the total FDI the Southeast Asian country received.
One reason, according to the IHS Market report, is that the U.S. have no free trade agreement with Vietnam and the broader Association of Southeast Asian Nations.
But that’s just “one of many factors tempering the pace and magnitude of supply-chain diversification” into Vietnam, Ryan added.
Vietnam is also faced with a shortage in skilled labor, he said. The country’s talent pool has not been able to support the influx of inquiries, as many multinational companies are looking to relocate parts of their manufacturing supply chain outside of China, Ryan explained.
He said,” Simply, demand is outpacing the current ability to supply,” explaining that infrastructure in Vietnam is not yet up to standards for many international firms to establish shops.
Specifically, this means finding local business partners and fulfilling government requirements for obtaining permits, according to Ryan, could be major obstacles for foreign companies.
Furthermore, Vietnamese roads were poorly built and ports are already congested, which add to the time needed to travel and move goods around, he added.
“Combined, these factors are lengthening the delivery cycle to consumers and point to a drawn-out process of extricating operations from mainland China’s orbit,” Ryan noted.


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