Opportunities for Vietnamese goods in the US market.

The US is no longer China's largest export market.

A noteworthy piece of information recently reported by Nikkei Asia indicates that, for the first time since 2006, the United States is no longer China's largest export market. This information comes amidst tensions between the two superpowers that are reshaping supply chains. The newspaper cites data from the US Department of Commerce showing that exports from China to the US in the first 11 months of 2023 decreased by 20% compared to the same period in 2022. Significantly, goods from China accounted for only 13.9% of total US imports, the lowest level in nearly 20 years, after peaking at over 21% in 2017.

The opportunity to increase Vietnam's trade volume with the US is enormous.

According to the article, exports from the Association of Southeast Asian Nations (ASEAN) to the US decreased in 2023, but still reached the second highest level ever. Notably, goods exported from ASEAN to the US doubled compared to 10 years ago. In fact, the US has been implementing a policy of increasing imports from other countries and minimizing dependence on China for many years. For example, smartphone exports from China to the US decreased by 10%, while smartphone imports from India increased fivefold; and laptop exports from Vietnam to the US increased fourfold.

Economist Associate Professor Dr. Nguyen Thuong Lang, from the Institute of International Trade and Economics (National Economics University), commented that the above information is an "extremely positive signal" for goods from Vietnam. Over the past few years, American companies have been seeking alternatives to Chinese goods after the Trump administration imposed import tariffs on thousands of goods from China. The Joe Biden administration subsequently maintained these high tariffs. Therefore, the reduction in Chinese goods entering the US is understandable.

For Vietnam, our export production includes many items similar to those exported from China to the US. Along with the shift of production lines away from China in recent years, Vietnamese goods have a significant advantage following the important political event last year when the US and Vietnam established a comprehensive strategic partnership. The US is targeting Vietnam in many important sectors such as digital infrastructure, energy, logistics, and especially semiconductor technology and minerals used in semiconductors. This presents a great opportunity for Vietnam, and businesses and policymakers need to pay attention to it in order to guide and encourage the export of high value-added goods to this second largest consumer market in the world.

The number of Vietnamese goods exported to the US that are being placed under a trade safeguard tariff warning is increasing. This is a major warning that the country's trade sector must take note of.

Associate Professor Dr. Nguyen Thuong Lang, Institute of International Trade and Economics (National Economics University)

Warning about counterfeit goods...

In fact, the US government's friend-shoring strategy (rerouting supply chains to avoid disruption ) is one of the reasons for the decline in Chinese exports to the US. To counter this, China is choosing a "roundabout" strategy, investing more overseas to export goods to the US. Two markets mentioned in the Nikkei Asia article that are seeing increasing imports into the US are Mexico and Vietnam. Without citing official figures, an analyst in the article commented that Chinese foreign direct investment in Mexico is increasing, indicating that Chinese manufacturers are setting up factories there for final assembly.

In Vietnam, data from the General Statistics Office shows that in 2023, the Hong Kong Special Administrative Region (China) ranked third in foreign direct investment (FDI) into Vietnam, after Singapore and Japan, with over US$4.68 billion in newly registered capital, accounting for nearly 12.8% of total FDI into Vietnam that year and increasing 2.1 times compared to the previous year. China ranked fourth. Notably, in the past year, in terms of the number of investment projects, China led in the number of new projects, accounting for 22.2%.

Marketing expert Vu Quoc Chinh believes that the increase in investment from China into Vietnam has a positive aspect: it helps Vietnamese goods export more and increases foreign investment. In particular, from a social perspective, the more investors in Vietnam, the better the job creation opportunities. However, he cautioned against the possibility of Chinese goods entering Vietnam through these investors and only undergoing final processing, then being re-exported to the US with false country of origin.

"A 20% reduction in goods from China to the US is a huge number, but that's the actual figure on paper from the US Department of Commerce. With the 'roundabout' policy, I believe that a lot of Chinese goods entering the US originate from other markets. They are mainly dispersed in the form of semi-finished products, sent to factories in other countries with incomplete goods, where the final processing is completed before export."

The policy of using hidden brands through partners in other countries has been successfully implemented by many Chinese businesses for a long time. This method isn't necessarily called misrepresenting origin because, in reality, the laws of other countries don't prohibit it, as long as the domestic content ratio of a product meets the requirements. They may not disguise their goods as Vietnamese to export them, but they find loopholes in international policies and laws. Many countries know about it, but cannot prohibit it. Therefore, Chinese goods, through this roundabout policy, avoiding high tariffs from the US, have still managed to enter the US in recent years," said Mr. Vu Quoc Chinh.

According to Mr. Chinh, Vietnam's problem lies in tightening the process of recognizing the origin of goods. On the one hand, we must be shrewd and have stricter policies regarding goods from China. On the other hand, we must have regular post-investment inspections regarding raw materials and labor practices. "The risk of Chinese goods evading origin requirements and entering Vietnam is very high due to the close geographical proximity. The Ministry of Industry and Trade must regularly issue warnings to effectively prevent this," Mr. Chinh said.

Sharing the same view, Associate Professor Dr. Nguyen Thuong Lang added: "The number of goods from Vietnam exported to the US that are subject to trade safeguard tariff warnings is increasing. This is a major warning that the country's trade sector must pay attention to. Early warnings and preventative measures are needed. Because when detected, the reputation of Vietnamese goods in major markets will be affected."

According to the Ministry of Industry and Trade, as of the end of November 2023, Vietnamese export goods were the subject of 239 investigations. In 2023, Vietnamese export goods faced an increased number of investigations and applications of trade defense measures by foreign countries.

According to the Vietnam Trade Remedies Department (Ministry of Industry and Trade), the number of trade remedy cases applied to Vietnamese exports is increasing rapidly. While there were only 50 cases in the period 2001-2011, this number increased 3.5 times to 172 cases in the period 2012-2022.

According to the WTO and Integration Center, in the late 1990s and early 2000s, the goods most frequently targeted by trade defense lawsuits were those with high export volumes, strong export potential, or key export items, such as seafood and footwear. However, in recent times, the number of goods and sectors subject to trade defense lawsuits has expanded to nearly 40 items, including products with medium and small export values ​​and volumes, such as lawnmowers, honey, cigarette packaging paper, and staples.

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