The US-China trade dispute and the opportunities and challenges for Vietnam

The US-China trade dispute and the opportunities and challenges for Vietnam

Will the US-China trade dispute, if it happens, bring the opportunities to Vietnam to penetrate the US market, or become a threat to Vietnam’s economic development?

The US Department of Commerce has declared the new high tax rates on the solar cell imports from China. The decision, in the eyes of observers, would ignite a trade dispute between the two powers.

The conflicts which cannot be reconciled

On May 18, 2012, the US Department of Commerce announced the decision to impose the tax rates of 31-250 percent on the solar cells imported from China.

Prior to that, on March 20, 2012, the US imposed the tax rates of 2.9-4.9 percent on solar cells and accessories from China.

The new tax rates would have direct big impacts on a series of Chinese manufacturers. 61 Chinese companies would bear the tax rate of 31 percent, others 250 percent.

China has voiced its protest against the US’ decision, describing this as a form of “trade protection.”

The tension between the two countries has been escalating due to a series of disagreements. The US unexpectedly raised the import tariff from four to 35 percent on Chinese tires in September 2009. In a retaliation action, in October 2009, China announced the decision to impose the tax rate of 36 percent on the US’ nylon products.

Since then, the US and China have been “paying the opponent in its own coin,” with the tax rate increases imposed on steel, paper, salt, rare earth and wind power products.

The decision on the solar cell tariff increases was the latest action in the retaliation campaigns run by the US.

Experts have warned that the irreconcilable disagreements may lead to a trade dispute between Beijing and Washington, which would not only bring damages to both the powers, but also badly affect the world economy.

What should Vietnam do?

A trade war refers to two or more states raising or creating tariffs or other trade barriers on each other in retaliation for other trade barriers. As such, if a trade war occurs, a lot of trade barriers such as dumping tax, anti-subsidy tax… would be would by the involved parties.

Some observers believe that once the US restricts the imports from China, this would be a big chance for Vietnam to penetrate the potential market, especially when the US tends to head its attention to potential markets in Asia.

Especially, Vietnam, with the great advantages in farm produce, would be able to boost the exports of these products to the US, which would help Vietnam escape from the heavy reliance on familiar markets.

However, China would not stand idly in the war. The loss of the huge market – the US – would bring heavy losses to the Chinese economy. Therefore, China would have to find its own ways to bring goods to the US.

One of the ways, according to experts, is that China may slip its goods in Vietnam and then export the goods to the US as Vietnamese goods. As such, it may “borrow” Vietnam’s prestige to export low quality to the US market.

This happened in reality. In late 2011, wind tower products which were sourced from Vietnam and China were the defendants in a dumping lawsuit raised by four US solar cell manufacturers.

At that moment, Vietnamese companies and government officials denied the fact that these were Vietnam’s products. Finally, a Vietnamese business was found as importing low cost products from China, and re-exporting the products as Vietnamese products. Experts have warned that this would seriously harm the images of Vietnamese goods in the world market.

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