As the United States considers imposing further tariffs on China amid ongoing trade tensions, foreign companies operating in China are shifting production to its southern neighbor, Vietnam. The disputes between the world’s two largest economies could prove a significant boon for the Vietnamese economy, which this year reached its highest rate of growth in the eight years.
Official data published by the Vietnamese authorities shows that the country’s GDP has grown by 7.1 percent in the first half of 2018, and its export average surged from 17 percent in 2017 to 20 percent through this June.
Foreign direct investment (FDI) into Vietnam increased by 9.2 percent from January to August in 2017 to $11.25 billion in the same period this year, Vietnam’s investment ministry said last month.
Because of geostrategic and commercial factors, Vietnam is unlikely to be a target of Trump’s trade war, despite its having a $40 billion trade surplus with the United States, said Bill Stoops, chief investment officer of Dragon Capital.
If major foreign clients decide to move their production orders to Vietnam from China to prevent high taxes, Vietnam’s leather, footwear, and handbag exports could grow by 9-10% from 2017.
As Chinese and foreign enterprises operating in China start to seek alternative manufacturing bases, Vietnam is highly likely to become one of the top priority destinations, which would thus create more jobs, and fuel more exports and economic growth.