US-China trade war’s impact on Vietnam: economist

Taxed goods are mostly certain types of hi-tech products

However, the indirect impact in the long term could be significant, according to Nguyen Anh Duong from the Central Institute of Economic Management (CIEM), who was interviewed by cafef.vn.

In the immediate time, the US decision will make imports from China more expensive, from which American consumers will suffer. Meanwhile, other economies will stay safe, Dưong said.

However, if China takes retaliatory measures, the sphere of influence will be larger. By that time, third countries will also meet difficulties because of the uncertainties in the trade policies of the two countries.

Will the trade war break out, or is this just intimidation?

The US may stop and consider the situation if China takes positive moves. However, if China continues to retaliate, the US may consider taxing more product items from China.

I have to remind you that the decision on imposing supplemental taxes on Chinese products from July 6 was made after the US investigation on intellectual property. This means that the US may tax more import items if it considers other issues such as the environment and exchange rates.

I think it’s highly possible that the two countries will reach a negotiating outcome that will ease tensions in 2018. If the trade war really breaks out, both economies will suffer.

How will the trade war affect Vietnam, an economy with high openness?

The impact in the short term is not much, but the indirect impact could be significant.

Capital flow, for example, will be affected. The global financial market, after statements by the US and China, has had fluctuations.

Investors sometimes react too quickly and excessively, affecting their investment decisions. Meanwhile, the world is seeing a trend of withdrawing capital from emerging and developing markets. This puts pressure on markets, including Vietnam.

Vietnam is a relatively small economy compared to China. Vietnam is not a subject for the US to aim at. However, the current policies such as imposition of anti-dumping duties and some other trade remedies are enough to cause a headache for Vietnam. This is partially because the US has not recognized Vietnam as a market economy.

The Chinese products to be taxed additionally from July 6 won’t be brought to Vietnam for sale, because these are hi-tech products. However, if US-China tension increases, thus affecting other products such as steel and crude oil, the impact on Vietnam will be not small.

Because of difficulties in trade relations with the US, China may take the initiative in restricting imports from third countries.