WSJ: How did Vietnam surpass many major countries and become the 6th source of US imports?

15/05/2021
The US's imposition of tariffs on Chinese goods has caused a sharp drop in imports from China, and at the same time, caused significant changes in the items that Americans often buy from China, such as appliances. mobile devices, furniture, textiles...
Nearly two-thirds of all goods imported from China - or about $370 billion annually - were taxed by the US in 2018 and 2019. According to a Wall Street Journal analysis from Trade Data Monitor data, currently only half of China's exports to the US, or $250 billion annually, are subject to tariffs. This is because many US businesses have turned to buy in other markets.
 
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In the period 2018-2019, the US imposed tariffs on Chinese imports, aimed at boosting production at domestic factories. However, this "re-production support" is not considered to have a significant impact, as a series of businesses have turned to find suppliers in other Asian countries.

Notably, Vietnam is the biggest beneficiary of this trend. Currently, Vietnam ranks 6th globally in terms of imports to the US, while in 2018 the country was still in 12th position.

Mr. Craig Allen, Chairman of the US-China Business Council said: "If the goal is to reduce imports from China, the imposition of tariffs has worked. However, if the goal is to create more jobs in the sector, If it is to increase imports from Asian countries, or to increase manufacturing jobs in Vietnam, then this goal has also been successful."
 
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Semiconductors are a prime example. In the US-China trade war, the US wants to reduce semiconductor imports from China, causing chip imports from China to decrease sharply, but from Vietnam or Malaysia to increase.

Among the Chinese goods subject to the tariffs, telecommunications equipment, and computer components were the most affected. Specifically, the import turnover of each item decreased by about 15 billion USD compared to 2018, the WSJ analysis stated.

Accordingly, the revenue from tariffs that importers have to pay to the US Treasury decreased sharply. In the fiscal year that ended in March this year, the US collected $66 billion from tariffs, down from a peak of $76 billion recorded in February 2020.

However, in recent months, the import turnover of Chinese goods not subject to tariffs has begun to show signs of increasing. Overall, though, imports from China still fell from a peak of $539 billion in 2018 to $472 billion in the fiscal year ending March 31, 2021.

"The trade war has had a negative impact on Chinese goods longer than the Covid-19 pandemic. The echo of the epidemic is starting to fade, but the lingering effects of the trade war are still there," economist Adam Slater at Oxford Economics emphasized.

In January 2021, the world's two largest economies signed a phase one trade agreement to temporarily put an end to the trade war, but the US still maintained tariffs as a lever to force China to comply with the agreement holder. To date, China is still calling for tariff reductions.

Although the tariffs are largely paid for by US businesses, Chinese factories may lose out to rival factories in Vietnam, Malaysia, and Mexico.
 


The Joe Biden administration is currently conducting a comprehensive review of US trade policy, but top government officials have not released information regarding future punitive tariffs.

In an interview with the WSJ in March, US Trade Representative Katherine Tai said that shortly, the US government is not ready to remove tariffs on Chinese imports.

"No negotiator wants to give up his leverage," Katherine said.

The Trump administration has issued a total of four rounds of punitive tariffs on Chinese goods, each listing thousands of items that will be subject to tariffs.

According to recent trade data, the first and second rounds of tariffs took effect in July and August 2018, applying to $34 billion and $16 billion of goods, respectively. Businesses must pay a 25% tax rate on goods such as telecommunications equipment, alloys, semiconductors, and electrical equipment.

In the 12 months to March of this year, the US imported a total of about $22 billion in items in the first round of tariffs and $9 billion in the second, down 36% and 43% respectively from the original value..
 
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The third tranche applies to more than 200 billion USD of goods, taking place immediately after the period of escalating trade tensions and took effect in September 2018. During this period, the Trump administration imposed tariffs on several key categories of consumer goods such as furniture and apparel, as well as auto parts, electronics, and TVs.

The tariff on goods for the third tranche started at 10% but was later raised to 25%. In the past 12 months, the total import turnover of these items reached 119 billion USD, down 43% compared to the initial data.

In some cases, tariffs provide an incentive for businesses to accelerate their move out of China. For furniture, for example, many US importers turned to the Vietnamese market, even before the trade war broke out. "It's less expensive to produce goods elsewhere than to bring production back to the US," said Chad Bown, a senior fellow at the Peterson Institute for International Economics.
The fourth and final tax period will be applied in September 2019. Tariffs are mainly focused on computers and computer components, garments, TVs, and shoes.
 
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Previously, according to WSJ's analysis, about USD 111 billion of Chinese goods were affected; After that, the Office of the US Trade Representative announced about $120 billion in goods to be taxed in the fourth round.

After the phase one agreement, tariffs on goods included in the fourth round of tariffs were reduced from 15% to 7.5%, and the import turnover of these items decreased insignificantly. In the 12 months to March 2021, the US imported about $97 billion of group 4 goods, down about 13% compared to the original data.

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