Haven can wait: how Southeast Asia ultimately benefits from Trump’s trade crusade

As trade tensions between China and the US show signs of lessening, Washington is turning its attention to countries used by firms as a pit stop to avoid tariffs

But instead of being another casualty in the trade war, experts say a crackdown on tariff-dodging practices could see economies in the region benefit from sustainable growth

Reading Time:6 minutes

The US has raised duties on steel from Vietnam that Washington says originated in China, part of its bid to crack down on firms evading tariffs. Photo: AP

Published: 9:30am, 20 Jul 2019Updated: 6:27pm, 18 Dec 2019

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.

US imports from Vietnam and other Southeast Asian economies are up, but there are concerns they could be accused of tariff-dodging activities and face US ire in the form of sanctions. Photo: AFP

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.

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