The Trade War Classified: Internal
Vietnam is the Biggest Beneficiary of the Trade War 16 | Classified: Internal
Trade War: Opportunities and Risks OPPORTUNITIES RISKS • Vietnam is taking manufacturing • Vietnam could be targeted by market share from China the US • • The development of local supply- A Flood of Trade War motivated FDI could overwhelm Vietnam’s chains is accelerating out of necessity Infrastructure & Labor Market 17 | Classified: Internal
Trade War: Opportunities 1) The US Gets 60% of its Tech Imports from China... …But only 2% of US Tech imports are made in Vietnam 2) Vietnam Tech Exports to the US are Still Tiny VN Tech exports to US = $8b 3%/VN exports CN Tech exports to US = $250b 10%/CN exports 3) Vietnam’s main weakness: poor supporting industries… …But the FDI deluge is starting to prompt supply-chain upgrading 18 | Classified: Internal
Trade War: Risks • Vietnam had the 5 th Largest Trade Surplus with the US in 2018: China $420b $81b Mexico $68b Germany $67b Japan $40b Vietnam • Vietnam’s Trade Surplus with the US is up 30% in 9M19 ! Companies appear to be circumventing tariffs via Vietnam - Exports to the US +28% yoy (Trade Balance = +$34b) - Imports from China + 17% yoy (Trade Balance = -$28b) - 19 | Classified: Internal
Trade War: Risks Concerns that Vietnam is “Too Full” for more FDI These concerns are mainly raised by low value-add firms (garments, etc.) Vietnam has adequate Logistics & Industrial Land Capacity (but urgently needs to upgrade physical infrastructure!) Factory wage inflation could surge from 7% to 12% If 5% of FDI in China moves to Vietnam Note: Vietnam has ample workers Less than 10% of VN’s workers currently employed by FDI firms 20 | Classified: Internal
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