In an article for South China Morning Post, 2014-15 Luce Scholar Meaghan Tobin discusses the effects of US-China trade tensions on Southeast Asia. Analysts see opportunities for economic growth as companies move operations out of China to avoid tariffs and ASEAN nations work to eliminate tariff-dodging practices.
Business is good, but Nguyen Van Khanh is nervous. The vice-chairman of Ho Chi Minh City’s shoes and leather association might be expected to count among the so-called winners of the United States’ trade war with China, especially as Vietnam’s trade with the US has intensified in the past year.
Its exports to the US surged past US$25 billion in the first five months of this year, a 36 per cent jump from the same period last year – and footwear is Vietnam’s third-most-important export to the US, worth more than US$6 billion last year.
The relocation of manufacturing firms from China amid the trade tensions has also fuelled growth in Vietnam’s economy – though some of the firms have moved only in name, using the Southeast Asian nation as a pit stop so they can claim their products were made there. Khanh is worried this false-origin labelling is so widespread that it will become an excuse for the US to slap tariffs on an array of Vietnamese products, and he has reason to be.
In a move mirroring the opening salvo of the trade war with China, US President Donald Trump earlier this month hit Vietnam’s steel exports with duties of more than 400 per cent for allegedly originating in Taiwan and South Korea.
A year into the trade dispute, US imports from Vietnam, Taiwan, South Korea and other economies around Southeast Asia are up, but there are concerns they could be accused of tariff-dodging activities such as transhipment, risking US ire in the form of sanctions.
Some experts warn that such penalties could dampen growth for markets with already undervalued currencies, and leave them susceptible to a flood of imports from China. But if handled right, others say working to eliminate tariff-dodging practices could help Southeast Asian economies turn the rapid gains they are seeing from the trade war into long-term growth.
Such measures may also encourage firms to physically move their operations to nations in the region, which would deepen manufacturing capacity there, in addition to strengthening the integrity of customs regulations and boosting the quality of exports.