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How is Vietnam affected when the trade war escalates

Wednesday - 15/05/2019 19:22
It is anticipated to be beneficial in some industries but it is difficult for Vietnam to out of the general trend when global trade is "hurt".
On Twitter May 13, US President Donald Trump mentioned Vietnam as an alternative market for manufacturing companies in China. The White House boss also affirmed the fear of the second economy in the world is that customers choose to buy replacement products from another country.

The assessments of President Donald Trump, in fact, have been mentioned by analysts since a year ago, when two of the world's largest powers began conflict. Vietnam, from the early stages of US-China trade tension, has been forecast to be one of the few beneficiary markets.

Fitch Ratings in the recent report evaluated, there are signs that Vietnam can benefit from the impact of trade tension from the trade flows away from China.

These positive reviews are considered as one of the reasons why investors in Vietnam market have been calm in the morning session on May 14, despite the slump of the US and Chinese stock markets. VN-Index, after a strong decline at the beginning of last week, returned to a state of struggle, despite the escalating tensions. Today's trading session, even the HoSE representative index is still in green, contrary to the sell-off scene last night at key indexes of the US market like Dow Jones or S & P500.

"It is not that investors are not interested in trade war but in fact Vietnam is forecasted that one of the few markets will benefit in the short term. There is no reason for excessive pessimism," said Bui. Nguyen Khoa - Head of macro group of Securities Market of Vietnam Bank for Investment and Development (BSC) shared with VnExpress this morning (May 14).

According to the expert, the previous forecasts have not changed, many industries are expected to benefit to "replace" Chinese goods in the US market, along with the shift. Investment from the second world economy to neighboring markets will boost FDI flows.

However, in addition to the positive points in the short term, a longer-term perspective on the new state of global trade suggests that Vietnam will be hard to avoid the "storm".

Reply VnExpress about the influence of Vietnam when the tension of US-China trade has escalated, Mr. Pham Hong Hai, General Director of HSBC Vietnam said that no country is outside this "war" and Vietnam is not an exception.

"People still say that Vietnam will be a profitable country when the trade war breaks out. But in my opinion, with measures to respond between the two leading economies in the world, everyone will suffer", Mr Hai evaluation.

Explaining this point more, HSBC Vietnam CEO said that when the tariff is pushed to a new level, all goods that follow the global supply chain will be affected, and that is not just a American or Chinese private story. "The current global supply chain is very complex, involving many different countries. When global trade flows are disturbed, the impact on those countries on that flow is inevitable. Vietnam is is one of the largest open economies in the world with a scale of about 200% of GDP, "commented HSBC Vietnam General Director.

Besides, trade tension can only be at the initial level, there are many other things behind this picture. The impact of the trade war on global capital inflows will greatly affect countries that are dependent on this like Vietnam.

"FDI is the growth engine of Vietnam. If only one factor creates a disturbance of this capital flow, the Vietnamese economy will be affected. The typical example is the period of economic crisis in 2008, many FDI enterprises have withdrawn from the market and moved back to their home countries, investment flows have been interrupted and have great impacts on the economy, "Hai commented.

Mr. Bui Nguyen Khoa also said that in the short term Vietnam will benefit from gaining market share from Chinese manufacturers, but when global trade disturbance takes place on a large scale and in a long time, no any country escaping from negative influences.

"The most frightening thing about the escalating trade war is that the trade flow is interrupted, affecting the momentum of global economic growth. With a large open economy like Vietnam, short-term benefits. from a number of benefited industries, it is unlikely to compensate for the long-term impact, "said Mr. Khoa.

The Center for Socio-Economic Information and Forecasting (NCIF - Ministry of Planning and Investment) has also estimated that the trade war between the two largest economic powers will cause Vietnam's GDP to drop by 0.09%. in 2019 and peaked at 0.12% in 2020-2021. However, this estimate comes in mid-2018, with the US scenario imposing a 25% tax on 34 billion USD of goods imported from China, while the scale of current trade has increased greatly.

Before the US move to put Vietnam on the watch list of countries to manipulate money, experts from BSC said that putting the watch list as a "yellow card", but not sure that Vietnam was on the list official. Timely moves from the Government, such as the phone call between the Deputy Prime Minister and the US Finance Minister yesterday, are a positive signal for the market.

On the possibility that the US will continue its negative protection policy on markets outside China, experts from BSC believe that "the US-China war is not only limited to trade but is actually an expansion in terms of multifaceted relations between the two largest powers in the world ".

Mr. Khoa does not think that Vietnam will be subject to tax. "Vietnam and other export markets as an alternative to Chinese goods subject to tax. If the US applies a protection policy to these markets, the direct affected people are consumers. US, "said Khoa.

Author: Translated by CoPhieuViet

Source: Vnexpress newspaper

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