Why Vietnam became the winner from the first year of the US-China trade war
- The economy of the southeast Asian nation was boosted by almost 8 per cent due to the shift in production as importers sought to avoid Donald Trump’s tariffs
- Analysis by Japanese investment bank Nomura also shows that trade diversion benefited Taiwan, South Korea, Chile, Malaysia and Argentina
Vietnam is the biggest winner from the shift in supply chains caused by the nearly year-long trade war between China and the United States, according to a report, as importers from the world’s two largest economies sought to avoid paying increased tariffs.
The bank studied trade data for the world’s 50 biggest economies. Its report spanned from the first quarter of 2018, shortly before the US released its first list of Chinese imports on which it planned to increase tariffs, to the first three months of 2019. The goal was to gauge the extent of the trade diversions – the redirection of goods to avoid paying duties.
The majority of Vietnam’s gains came from additional imports of goods covered by US tariffs on China, mainly electronic apparatus for telephones, furniture and automatic data process machines, likely because multinationals could swiftly relocate to factories outside China, the analysis said. A small portion came from China’s additional import of boards, panels, uncombed single cotton yarn, cotton and other electrical appliances from Vietnam instead of the US.
Diversion of US imports of goods, such as electronics, have also favoured Taiwan and South Korea, traditionally big manufacturers of such products. Furthermore, as China searched for new suppliers of agricultural goods such as soybeans and major commodities including copper, Chile, Malaysia and Argentina also stood out as beneficiaries.