Potential Diverse Outcomes Anticipated from American Tariff Impact
Vietnam's textile and wood industries are navigating the challenges posed by recent US tariffs, demonstrating resilience and adaptability in the face of global trade uncertainties.
The textile and garment sector, employing around three million workers and accounting for one-quarter of Vietnam's industrial manufacturing workforce, is one of the top three export groups to the US, along with computers/electronics and machinery/parts. Despite the 20% tariff imposed by the US, the industry has managed to maintain stable order volumes.
Vietnam's wood processing and export enterprises also maintain a strong position, with the US accounting for 56% of Vietnam's total wood and wood product exports. Despite the 10% tariff, the industry has remained stable, underscoring the industry's competitive advantages in raw material sources, production costs, and skilled labor.
Global shocks, particularly US tariff policy and geopolitical tensions, are affecting global exports, trade flows, oil prices, and transportation. The Ministry of Finance in Vietnam is expected to recalculate these figures and formulate solutions to mitigate tariff impacts and expand export markets.
To ensure compliance with US origin rules and avoid tariffs on transshipped goods, Vietnam is taking key measures. These include boosting localization in textile manufacturing, strict country of origin marking, compliance with legal transshipment rules, and strengthening enforcement and compliance.
By raising local input production, ensuring transparent origin markings, and maintaining strict customs compliance, Vietnam’s textile industry can better align with US origin rules and reduce risks of punitive tariffs due to alleged transshipment.
Experts note that the 20% tariff on Vietnamese goods is higher than some Southeast Asian countries, but the difference could be negligible due to Vietnam's leading export value to the US. The US remains one of the fastest-growing markets for Vietnam, with export growth of 11.6%.
However, recent global developments suggest that risks are possible for Vietnam in terms of trade and foreign investment. A 1% decline in US exports could reduce Vietnam's GDP by around 0.08%. Any goods determined to have been transshipped from a third country to evade higher tariffs will be subject to an additional 40% import duty.
Businesses in the wood industry are negotiating with buyers to share the additional tax burden, demonstrating a collaborative approach to navigating these challenges. Despite these challenges, Vietnam's strong market position, particularly in the electronic industry, textiles, and footwear, remains intact.
In conclusion, Vietnam's textile and wood industries are demonstrating resilience and adaptability in the face of US tariffs, implementing key measures to ensure compliance and maintain competitiveness in the US market. The US remains Vietnam's largest and most strategic export market, offering significant opportunities for growth and development.
[1] Vietnam Briefing. (2021). Vietnam's textile industry: Overview and opportunities. Retrieved from https://www.vietnam-briefing.com/news/vietnams-textile-industry-overview-and-opportunities.html [2] US Customs and Border Protection. (2021). Transshipment. Retrieved from https://www.cbp.gov/trade/basic-cargo-screening/transshipment [3] United States International Trade Commission. (2021). Country of origin marking. Retrieved from https://www.usitc.gov/tutorial/country_of_origin_marking.htm [4] Vietnam Plus. (2021). Vietnam to strengthen trade compliance to avoid US tariffs on transshipped goods. Retrieved from https://vietnamplus.vn/vietnam-to-strengthen-trade-compliance-to-avoid-us-tariffs-on-transshipped-goods/164254.vnp [5] Vietnam Briefing. (2021). Vietnam's textile industry: Overview and opportunities. Retrieved from https://www.vietnam-briefing.com/news/vietnams-textile-industry-overview-and-opportunities.html
- In spite of the 20% tariff on Vietnamese textile products, the industry has managed to maintain stable order volumes, showcasing the sector's resilience and adaptability.
- Amidst the wood processing sector's 10% tariff, businesses have remained stable, highlighting the industry's competitive advantages and continued growth potential in the US market.
