Progress made through US trade pact
Progress made through US trade pact
Vietnam’s trade with the US has continued to grow, driven by the two nations’ comprehensive strategic partnership, with the US gradually opening its market further to Vietnamese exports. However, concerns are emerging over potential increases in import taxes from next year depending on the result of November’s US presidential election.
The General Statistics Office (GSO) reported that in the first eight months of 2023, Vietnam’s exports to the US reached $62.3 billion, down 19.1 per cent on-year due to economic challenges and US technical barriers. Total trade between the two nations stood at $71.6 billion, with Vietnam’s imports falling by 6.6 per cent as compared to the same period last year.
However, the situation has improved this year, with Vietnam’s exports to the US in the first eight months of 2024 rising to $77.9 billion, solidifying the US as Vietnam’s largest export market, followed by China, the EU, ASEAN, South Korea, and Japan (see chart). Total trade reached $87.7 billion, with US exports growing by 6.9 per cent on-year to $9.8 billion.
Key Vietnamese exports to the US include high-tech products such as consumer electronics and smartphones, as well as textiles and garments, footwear, and agricultural products.
According to the GSO and the US Embassy to Vietnam, this rebound reflects the strengthening trade relationship between the two countries, following the elevation of their bilateral ties to a comprehensive strategic partnership in September 2023, during US President Joe Biden’s historic state visit to Vietnam.
“The potential in the US-Vietnam trade and investment relationship has never been brighter. The distance we have covered in nearly three decades since establishing diplomatic relations is remarkable,” said US Ambassador to Vietnam Marc E. Knapper. “The level of bilateral goods trade between the United States and Vietnam now stands at $124 billion annually, approximately 300 times greater than it was in 1995. This relationship is further energised by substantial foreign direct investment into Vietnam.”
US Department of Agriculture Undersecretary Alexis Taylor last week led the largest agricultural trade delegation ever to Vietnam, bringing representatives from 50 US businesses and nine states’ departments of agriculture to mark the first anniversary of the US-Vietnam Comprehensive Strategic Partnership (see article below). In June, Ambassador Knapper led a record-breaking delegation of 65 Vietnamese businesses to the SelectUSA Investment Summit in Washington, D.C., with a record number of female executives in attendance.
In a joint leaders’ statement on the comprehensive strategic partnership, the two nations reaffirmed the importance of economic, trade, and investment cooperation, highlighting innovation-driven inclusive growth as key drivers of the bilateral relationship.
“Both sides pledged to create favourable conditions and facilitate the further opening of markets for each other’s goods and services, support trade and economic policy, and regulatory measures to achieve this aim; and to address issues such as market access barriers via the Trade and Investment Framework Agreement,” the statement read.
Market opportunities
One contributing factor to the increase in bilateral trade, particularly in Vietnamese exports, is the US offering stronger conditions for Vietnamese goods. In late August, Vietnam’s Ministry of Agriculture and Rural Development and the US Department of Commerce reached a cooperation agreement on agricultural trade.
This included a meeting between Vietnam’s Deputy Minister of Agriculture and Rural Development Hoang Trung and US Deputy Secretary of Agriculture Jason Hafemeister, which celebrated the approval of US peaches and nectarines for export to Vietnam, marking a significant milestone in agricultural trade between the two nations.
Progress has also been made on other fruit exports, with Vietnam agreeing on technical standards for its passion fruit and advancing discussions on market access for US mandarins. Further discussions have focused on Vietnamese fruits such as seedless limes, guavas, and jackfruit. In August, Vietnam approved the import of California nectarines and peaches to Vietnam.
The two nations also agreed on pest control measures and the next steps for US mandarins, plums, lemons, pomegranates, and others.
At present, Vietnam is exporting eight types of fruit to the US including dragon fruit, mango, longan, litchi, rambutan, star apple, pomelo, and coconut.
“Technical procedures have been handled satisfactorily, and we hope Vietnam’s passion fruit will soon be exported to the US,” said Hoang Trung. He also noted that paperwork for other fruits, including seedless limes, jackfruit, and guava, has been processed, with negotiations ongoing.
At the same meeting, an MoU was signed between Cargill US and Vietnam’s Khai Anh Binh Thuan company to import 500,000 tonnes of corn and cornmeal for animal feed production, aiming to balance bilateral trade.
“Vietnam has become one of America’s fastest growing trading partners and we expect this positive trend to continue,” said Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi.
The US is now Vietnam’s largest agro-fishery export market, with $8.58 billion worth of goods exported in the first eight months of this year, a 23.5 per cent increase on-year and accounting for 21.4 per cent of Vietnam’s total agro-fishery-aquatic export turnover. Last year, this figure stood at $10.96 billion, responsible for 20.7 per cent.
Meanwhile, investigations by the US Department of Commerce (DOC) in late 2023 concluded that certain Vietnamese steel pipe products and stainless steel round wire had not evaded anti-dumping and countervailing duties, leading to the termination of further investigations.
Also last November, the US Department of the Treasury continued not to list Vietnam as a currency manipulator in its semi-annual report on the macro-economic and foreign exchange policies of major trading partners of the US.
Emerging risks
Despite the positive trade outlook, concerns are growing over potential challenges that could arise if Donald Trump is re-elected as US president in November. Trump has pledged to reinstate his trade policies, which could include a 60 per cent tariff on imports from China and a 10 per cent tariff on imports from other nations.
Recently, Trump hinted at the possibility of imposing tariffs of up to 20 per cent on most imports, citing the need to protect American jobs, raise revenue, and penalise what he describes as unfair trading practices.
“If Trump’s tariffs are reinstated, it could create big difficulties for Vietnam’s exports, especially those products with components imported from China, which may face anti-dumping duties from the US,” said economic expert Nguyen Tri Hieu. “Aquatic products, textiles, garments, footwear, and wood products could be among the most affected.”
In order to promote Vietnamese products into the US, Deputy Minister Hoang Trung has indicated that the DOC will provide “appropriate opinions” during consultations on trade remedies concerning Vietnamese products.
In the joint statement on the comprehensive strategic partnership, the US commended Vietnam’s efforts to modernise its monetary policy and exchange rate management framework, which have helped promote macroeconomic stability and ensure the soundness of the banking system.
Both nations have also supported increasing US investments into Vietnam, further boosting trade between the two countries.
Cumulatively as of August 31, the US was Vietnam’s 11th largest foreign investor, with total registered capital of over $11.94 billion across nearly 1,400 projects. In the first eight months of 2024, total newly registered and additional capital from US investors in Vietnam reached $135.8 million, a 27.5 per cent increase on-year.
