Vietnam is feeling the heat of a trade war, as more Chinese products are faking Vietnamese origins in a bid to enjoy preferential rates when exporting to the US, according to Do Thang Hai, vice minister of Industry and Trade.
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Hai also pointed to a possibility of American goods, especially beef and other high quality foods, going through a similar way to be exported to China.
According to Hai, the government has been aware of the situation and issued Decree No.31 on March, which sets forth origin of exported and imported goods. The decree is applied to traders and other entities relevant to origin of goods.
In May, the US slapped steep import duties on steel products from Vietnam that originated in China after finding they evaded US anti-dumping and anti-subsidy orders.
Specifically, US customs authorities will collect anti-dumping duties of 199.76% and countervailing duties of 256.44% on imports of cold-rolled steel produced in Vietnam using Chinese-origin substrate, the Commerce Department said in a statement.
Corrosion-resistant steel from Vietnam faces anti-dumping duties of 199.43% and anti-subsidy duties of 39.05%, it said.
Trade war places Vietnam's economy at risk
In a conference in July, economist Pham Chi Lan expressed concern over US-bound product made in China going through Vietnam to evade import tariffs. "Capital inflows to Vietnam in the coming time may become unpredictable, as Chinese investors will aim at Vietnam as an indirect route to the US."
Nguyen Duc Thanh, director of the Vietnam Institute for Economic and Policy Research (VEPR), said a trade war between the US and China will lead to the Chinese yuan (CNY)'s depreciation and cause a negative impact on Vietnam's economy.
A high trade-to-GDP ratio of 190% makes the Vietnamese economy more vulnerable to a potential global recession caused by an ongoing trade war between the US and China, Thanh said.
Thanh warned Vietnam could face a wave of Chinese goods flooding its domestic market, so plans are needed to prevent negative impacts on domestic enterprises.
Taking into account Fed's decision to hike interest rates and Chinese yuan (CNY)'s depreciation, Thanh suggested the Vietnamese central bank devaluate the dong, but at a more moderate pace than the CNY against the USD.
As the country mainly imports material inputs from China for processing and export, such devaluation would place Vietnamese importers at an advantage over the Chinese market and exporters.
In this scenario, Vietnam can take advantage of both China and the US to improve production and trade balance, he said.
Echoing Thanh's view, finance-banking expert Hieu warned CNY's depreciation would cause Vietnam's trade deficit with China to widen, which is already at the highest level among Vietnam's trading partners, second only to South Korea.
"If the trade war continues to escalate and China retaliates the US by depreciating the CNY further, Vietnam will be in real trouble," Hieu added.
