Vietnam most vulnerable in ASEAN to US-China trade war

By Dat Nguyen August 13, 2018 | 06:53 pm PT

The flags of China and the U.S. fly along Pennsylvania Avenue near the U.S. Capitol in Washington, DC. Photo by Reuters/Hyungwon Kang

Vietnam will be the most vulnerable country in Southeast Asia should the U.S.-China trade war persist, according to recent research.

This is because Vietnam is the most export-dependent of the ASEAN big five, which also includes Indonesia, Malaysia, the Philippines, and Thailand, Nikkei Asian Review quoted a report by Financial Times Confidential Research as saying.

Vietnam’s exports were worth $214 billion last year, 21 percent up from 2016, according to Vietnam's Customs. The U.S. was the largest importer of Vietnamese goods last year, buying goods worth over $41.6 billion.

“Vietnam's exports to the U.S. rank first among the ASEAN five, making the country sensitive to softening U.S. consumer demand,” the report said.

Another reason that Vietnam and other ASEAN member countries would be impacted by the escalating trade tension is the strengthening of the U.S. dollar, it said.

The dong has been devalued by 1.5 percent this year, and the government could take more aggressive action if exports slow significantly, it said.

But Vietnam, Thailand and Malaysia might still benefit from the currency weakness “if foreign direct investment shifts away from China as more companies hedge against the risk of trade action,” it added.

Trade tension between the U.S. and China continues to escalate. A Reuters report cited Beijing as saying last week that it would slap additional tariffs of 25 percent on $16 billion worth of U.S. imports.

The announcement came after Washington said it would impose 25 percent tariffs on another $16 billion in Chinese goods after imposing tariffs on $34 billion last month.

So far, China has now either imposed or proposed tariffs on $110 billion of U.S. goods, representing the vast majority of its annual imports of American products.

Vietnamese experts too have cautioned that the country would suffer collateral damage because of this trade war.

A report released last week by the Ministry of Planning and Investment’s National Centre for Socio-Economic Information and Forecast said Vietnam’s GDP growth would take a hit from the trade tension.

The report predicts a drop of 0.03 percent this year, 0.09 percent next year and 0.12 percent in 2020 and 2021.

In money terms, it translates into VND8 trillion ($344 million) in 2021.