AMERICA - CHINA TRADE WAR: THE POSITIVE IMPACT ON VIETNAM

For the past two years, the trade war raging between the United States and China has been the subject of much ink in a myriad of areas. This conflict has threatened the world order and the international relations of countries around the world. However, this trade war does not only have negative impacts. Some markets have been able to hold their own in the midst of this multi-factorial storm. This is the case of Vietnam, the big winner of this trade war.

A country already strong since the 2010's

Vietnam's economy can be described as strong. Even before the outbreak of the Sino-American trade war, two of the ten most dynamic cities in the world were Vietnamese. At the time, the local economy was one of the fastest growing in the world. The country had a stable currency and economy, which attracted direct investment. Vietnam possesses many large global companies. Vietnam also has a strong military power. According to various international rankings, the country is ranked 16th in the world in military terms. The Asian country is also a demographic power. Certainly on a different scale from its giant neighbour China, but with a total population of almost 95 million people, Vietnam is the 13th most populous country in the world. Finally, what could be called the icing on the cake: Vietnam ranks fifth among the happiest countries in the world and first in Asia in 2016. At the time, experts speculated that a potential trade war between China and the United States would be harmful to Vietnam and would affect these figures. But the country eventually took advantage of the circumstances. 

The short-term effects of the trade war

Vietnam has benefited from the situation. The trade war has forced many brands to stop subcontracting their production in China. As Vietnam and China are geographically very close, companies thought of relocating their production to Vietnam when the United States applied customs duties on Chinese products. China, for example, has built seven industrial zones in Guanxi province. About a hundred factories straddle the border between the two countries. The goods assembled there therefore benefit from the "made in Vietnam" label, even if the components come from China. This makes it possible to avoid the tariffs imposed by Washington on Chinese products. As a result, Vietnamese exports to the US are increasing considerably. At the beginning of 2019, they were 40% higher than in 2018. This is the largest increase among the 40 largest supplier countries. Several companies such as the giants Alphabet, Google's parent company, and Nintendo have announced plans to open facilities in the country. 

Vietnam has so far been the main beneficiary of trade diversion, gaining 7.9% of its gross domestic product (GDP) thanks to increased exports to China and the United States. Taiwan, Chile, Malaysia and Argentina are the other big winners. These figures make Vietnam the biggest beneficiary of the Sino-US trade war. The country's economy has thus become a favourable element for the stock market. Vietnamese companies are receiving more and more requests from wealthy Western clients wishing to invest large sums in the Vietnamese stock market. New investors are attracted by the prospects of substantial gains. The country is accelerating the restructuring of its economy; the Vietnamese stock market is expected to continue its momentum.

What is next for Vietnam?

It is a future economic powerhouse. The trade war is propelling Vietnam into the position of a major economic power. By 2050, Vietnam is expected to rank 20th in the world with a GDP of over $3 trillion. In terms of economic growth, it should be one of the fastest growing countries by 2050, along with India and Bangladesh (on average 5% per year). Vietnam is following in Brazil's footsteps: its incredible development is similar to that of Brazil a few decades ago. It is on the way to join the category of emerging countries.

Zoé.P