Experts: Firms should prepare themselves amidst trade war
Updated : Monday, July 09, 2018 3:15 PM (GMT+0700)

Domesticbusinesses should closely monitor the market situation, prepare to adjust theiroperations and redefine export markets to avoid negative impacts and capitaliseon opportunities from the US-China trade war, officials and expertsrecommended.

Domestic businesses should closely monitor the market situation, prepare to adjust their
operations and redefine export markets to avoid negative impacts from the US-China trade
war - Photo:

After US tariffs on 34billion USD of Chinese imports took effect on July 6, China’s commerce ministrysaid it was forced to retaliate, meaning 34 billion USD worth of imported USgoods including autos and agricultural products also faced 25 percent tariffs.

According to experts, whenthe trade confrontation between the US and China ramps up, Vietnam will beaffected.

Vu Tien Loc, Chairman of theVietnam Chamber of Commerce and Industry (VCCI), said that at the moment, thedirect and immediate impacts on Vietnam’s exports will not be much as goodssubjected to the tariffs by both the US and China are limited (includingChinese technology products and some US agricultural products such as maize,soybeans and meat, which aren’t Vietnam’s key export staples).

However, in the long run, itwill be difficult to predict the impacts if the war continues to escalate andmore tariffs are imposed, Loc said, explaining that being a small economy withthe US its largest export market and China its largest import market, Vietnamwill surely be affected by the confrontation.

On the other hand, Loc saidVietnamese businesses can take advantage of the opportunity to boost exports ofproducts that the Chinese versions have high tax rates in the US, and viceversa in China.

However, facing difficultiesentering the US market, Chinese goods will shift to other markets, includingVietnam. Vietnam, therefore, may suffer a trade deficit with China, Loc said.

Additionally, as exports tothe US fall, more Chinese goods will be consumed in the local market, causingdifficulties for Vietnam’s exports to China. The growth rate of Vietnam’sexports to China, which reached 30 percent in 2017, may be affected.

Echoing Loc, Tran ToanThang, head of the World Economic Department of the National Centre forSocio-Economic Information and Forecast (NCIF) under the Ministry of Planningand Investment, said the conflict would give Vietnam a good chance to export tothe US. 

However, on the other hand,if China could not export to the US, it would boost its exports to other countries,including Vietnam, Thang said.

According to Loc, at abroader level, the US-China trade war may cause global trade to change, causingVietnam’s exports to face fiercer competition in both other foreign markets andat home.

Besides, the trade war couldalso affect investment flow, global supply and demand as well as capital andsecurities markets, Loc said.

According to PhD Doctor PhamVan Dai, the flow of foreign direct investment (FDI) capital will not abruptlychange for the global production chain value. FDI capital and its productionchain will move from China to Vietnam as the labour cost in Vietnam is cheaperthan in China.

To mitigate the impact, Locsuggested exporters closely monitor the market situation, not only in the US orChina but also in other markets. They should prepare to adjust theirproduction, business, supply and markets flexibly.

The firms should also seekother stable and more favourable export markets besides the US and China,especially those Vietnam had signed free trade agreement with.

Economist Pham Chi Lan alsosuggested that Vietnamese firms expand their partnership to at least threemarkets to avoid dependence on a particular market.

Such a strategy will helpVietnamese firms survive and exploit new opportunities in the context of aglobal trade war, she said, suggesting that Vietnamese firms should increasetheir influence in other markets outside the US and China, such as the EU.

The establishment ofthe Comprehensive and Progressive Agreement for Trans-PacificPartnership without the US’s participation is a good way to deal with theunpredictable policies of the US and China at the moment, Lan said.

In the domestic market, Locsuggested that local firms cooperate with each other to take actions whennecessary. For example, firms can use legitimate trade remedies such asanti-dumping, anti-subsidy or safeguards to fight unfair foreign tradepractices.


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