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DRAGON FINDS A WAY OUT

When Going Gets Tough the Wily One Dodges

On 9th Jun 2019, Vietnam’s customs department brought out that certain companies are importing goods from China and then removing or replacing the packaging on goods to describe them as “Made in Vietnam”. 

Vietnam authorities have issued a stern warning to companies that have been relabeling Chinese goods as Vietnamese to avoid US tariffs.  This development is an indicator that the South-East Asian country is fast emerging as a leading regional export hub in the escalating US-China trade war.

Echoes from Past

It was in 2017 when the then  US President Donald Trump began his trade blitzkrieg against China with unprecedented gusto. 

That time the customs department in the northern port of Haiphong found a company that had imported speakers and phone chargers from China that had “Made in Vietnam” printed on their packaging. 

Products Affected

Vietnamese customs officials said that the trans-shipment of goods under forged certificates of origin was happening most often in the areas of textiles, seafood, agricultural products, ceramic tiles, honey, iron steel, aluminium and pressed wood.

This photograph taken on May 24, 2019 shows a Ted Baker brand men’s shirt labeled “Made in Vietnam” in a factory in Hanoi

Vietnam is the Gainer

News of the relabelling of Chinese goods will add to growing scrutiny of Vietnam’s role as a beneficiary in the US-China trade war, as more Chinese, US, and other companies step up purchasing or manufacturing in Vietnam to avoid rising US tariffs on a plethora of Chinese goods.

Vietnam is indeed the largest beneficiary of import substitution as buyers around the globe shifted their buying from China.  Imports to the US from Vietnam grew by 40 percent in the first quarter of this year, about double the rate of imports from South Korea and Taiwan.

The US is now Vietnam’s largest export market, and its trade surplus with the US reached $39.5bn last year. Vietnam has drawn closer to the US in recent years because of their shared suspicion of China’s growing regional ambitions.

It hosted Mr. Trump at the nuclear summit with North Korea’s Kim Jong Un in Hanoi in February 2019.  In May 2019, Vietnam escaped being designated by the US Treasury as a currency manipulator. 

Viewpoint

Amid the on-going trade war between two world’s largest economies, the United States and China trade tensions are raging.  Of late China has creatively figured out, how to avoid US tariffs.  Although Chinese companies have taken a beating from the trade war, the novel dragon way of circumventing the staggering tariffs is benefitting other countries.

Chinese goods have devised a way to reach American markets via countries such as Vietnam, Taiwan, and Mexico.  These countries are definitely winners here.  The Chinese manipulation has resulted in giving economies of these countries a significant boost.    

Exports from China to Vietnam in five key categories of products namely:

  • Machinery and parts
  • Electrical equipment
  • Furniture
  • Toys
  • Auto equipment and parts

Have been found to have increased by US$ 1.5 billion that is almost 20%.  The figure found to be US$ 1.4 billion amounting to  23% increase in the case of Taiwan.  The case of Mexico is even more interesting.  Exports from Mexico to the US has surpassed to that of from China to bag the sobriquet of “Single Largest Exporter to the US”. 

Meanwhile, China through its Ministry of Foreign Affairs (MFA) has reiterated that the only method to resolve trade row between the US and China is dialogue and consultation.

 Achieving a  win-win situation on the basis of mutual respect, equality and good faith.  the solution can definitely be found US and China relations are passing through a tumultuous time.  In this intriguing staring contest, the winner will be one who blinks last. 

12 Jun 19/Wednesday                                                           Written by Naphisa

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