Vietnam faces potential risks in exports to US

While Vietnam has been seeing a surge in exports to the US, experts are warning the country about potential risks when shipping to its largest export market in the coming time.

Data from the General Statistics Office showed that the US is the largest market for Vietnam’s exports in the first five months of this year, generating an export value of US$22.6 billion, up 28 percent year-on-year.

Some manufacturing products with the highest export growth were smart phones and parts (109.2 percent), electronics, computers and parts (58.4 percent), and textiles and garments (9.8 percent).

 Exports from Vietnam to the US have increased rapidly since 2010. The total exports in 2018 reached US$47.53 billion, more than triple the turnover of US$14 billion in 2010.

 However, experts said that the surge would pose potential risks, especially after the US Commerce Department, in three preliminary circumvention rulings, early this month imposed import duties of more than 400 percent on steel products made in Vietnam using input materials from the Republic of Korea and Taiwan (China).

The move was aimed at punishing South Korean and Taiwanese businesses which sought to circumvent the US’s steel import tariffs by rerouting their products through Vietnam for minor processing.

 According to analysts from financial information services provider Fitch Group, this move by the US suggests that the US could be beginning to turn its sights towards addressing its trade deficit with Vietnam, which stood at US$41.6 billion last year. Indeed, the US’s deficit with Vietnam is the sixth largest, behind that with China, Mexico, Japan, Germany and Ireland.

 Meanwhile, it was reported that Chinese exporters are attempting to circumvent the US’s tariffs with fake ‘Made in Vietnam’ labels on their products, the analysts said, adding as such, the US could impose similar import tariffs on other Vietnamese exports which are allegedly just goods rerouted from China to circumvent the US’s trade tariffs on Chinese e goods.

 And this is despite the Vietnamese authorities’ efforts to uncover these malpractices and their promise to buy more US goods to reduce their trade surplus with the US, Fitch analysts said, adding that tariffs being implemented on US imports of Vietnamese goods would pose a significant drag on the Vietnamese manufacturing sector, given that the US accounts for 18 .5 percent of Vietnam’s total export demand.

 Associate Professor and Dr. To Trung Thanh from the National Economics University also noted that Vietnam’s exports to the US could face three major risks: the falsification of origin of goods; the unpredictable policies and protectionist measures of the Trump administration; and the fall in external demand as an indirect impact from the trade war.

 Comprehensive measures

 In order to avoid the risks, Vietnamese enterprises are advised to build better business strategies after the US slapped huge tariffs on Vietnamese steel.

 According to Thanh, enterprises should be transparent in their production and trading activities, especially with the input materials, as well as ensure sufficient conditions for the origin of exports to the US and evidences for the goods origin in case of inspection.

 Besides, enterprises should develop product quality assurance systems like the food safety system to cope with rising non-tariff barriers. For the US market, they should study carefully business information, regulations and practices as well as trade partners before embarking on export activities. Most importantly, it is necessary to diversify the export markets to better withstand unpredictable risks from the US-China trade war.

 Minister of Industry and Trade Tran Tuan Anh said that authorities are planning to co-ordinate for the evaluation of products imported from other countries. However, he said, business associations should work with partners to provide guidance for firms, avoiding products from Vietnam to be subject to commercial sanctions.