Exports to the United States are very important for the Vietnamese economy. This is probably why the Asian country has become an integral part of a customs agreement. Euphoria is not in Hanoi.
The moderator of the television station CNBC is visibly excited – this is the greatest and most surprising news of the day, she says: “The US President has announced that there is a deal with Vietnam – tariffs of 20 percent on Vietnam’s imports in the USA.”
The Southeast Asian country is one of the first countries to agree with the USA in the customs dispute. President Donald Trump originally threatened with much higher tariffs, namely with 46 percent. In return, Vietnam now agreed to abolish all tariffs for US imports into the country, says Michael Faulender, Deputy Finance Minister of the United States: “This is a huge success for the Americans for the farmers. We have opened the Vietnamese market in a way that we have never managed to do before.”
No euphoria in Vietnam
About 14,000 kilometers from Washington, Peter Kompalla sits in his office in Ho Chi-Minh-Stadt in Vietnam. He is a so -called “delegate of the German economy in Vietnam” of the German Chamber of Commerce foreign, AHK for short. Great euphoria did not break out in Vietnam after the agreement was announced, he says.
“And that was surprising for me, it is not even the title topic in the media.” There had been an announcement by the government, which was rather factual. “Also positive,” said Kompalla. One is satisfied with the result because you have clarity. “But it is not the case that it is celebrated here.”
Dependence on exports to the USA
Vietnam is now very dependent on the United States: Around 30 percent of its gross domestic product has been returned to exports to the United States last year. Textiles, shoes and furniture are the most important goods for export, millions of employees in the country work for these sectors.
Many international companies such as Samsung, Adidas or Nike and Chinese companies have relocated a large part of their production in Trump’s first term to Vietnam in order to avoid the US tariffs imposed on China.
Many details of the agreement are still unclear
The details have to be waiting for the current agreement, says Peter Kompalla from the AHK in Vietnam. Because Trump also announced that a customs set of 40 percent should apply to so-called trans-hipping goods, i.e. products from third countries such as China, which get to the USA via Vietnam.
“And there is the big question of how exactly is it actually technically defined? How do you actually determine that? What is transshipping now and what are products that have actually been produced here?” Because Vietnam is dependent on a trade country and on imports – also from China.
Few globally operating companies would have 100 percent of their production, including the preliminary products, complete processing and all other services in Vietnam. For companies, the question now arises: Are your products perhaps occupied by 40 percent inch if they export to the USA, for example because some parts come from China? You can’t estimate that yet, says Kompalla.
Resistance from China expected
For Shawn Donnan, business expert at Bloomberg News, the exciting question is: How will China react? In the podcast of the US economic news agency, he said: “We may soon see agreements with countries such as Thailand, Indonesia, Japan or South Korea.” Their contracts could contain similar provisions that target China, said Donnan. “This should be increasingly isolating the Chinese economy. This will harm them. Accordingly, China will resist.”
The next few weeks will show whether he is right. Faulkender, the deputy US finance minister, announced to CNBC in any case: He is expecting a number of customs agreements with other countries next week at the latest.
