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Trade war hits rubber industry

The escalating trade war between China and the US is increasing the pressure on Vietnam’s rubber exports, as China is currently Vietnam’s largest export market.

In the ongoing China-US trade tensions, the office of the US Trade Representative has stated that almost all tyre types imported from China, as well as several other rubber products, polymers, and raw materials that are vital for the industry, will be subject to a 10% tariff as proposed by the current US administration.

Additionally, the White House recently slapped extra tariffs on US$200 billion worth of Chinese imports, including auto spare parts.

The policy has been in effect since September 24, with the manufacturing industry for rubber products likely to suffer adverse effects.

To Xuan Phuc from Forest Trends, which works to conserve forests and other ecosystems, said at a recent meeting that the tit-for-tat trade war has created dramatic shifts in the import and export policies of the two most powerful economies which will have a knock-off effect and negatively impact Vietnamese rubber exports.

China is the main importer of Vietnam’s raw rubber, making up some 60% of Vietnam’s total rubber exports. Moreover, some 70% of natural rubber is used for tyre manufacturing. Hence, the import of Vietnamese rubber by China could be affected.

Experts said that trade tensions have come at a time when international markets had already estimated a supply glut in rubber during the year. The US-China face-off could see further fallouts on the synthetic rubber trade as well.

The average export price of Vietnamese rubber fell in tandem with the global price, impacted by the escalating US-China trade war, according to the Agro Processing and Market Development Authority (AgroTrade) under the Ministry of Agriculture and Rural Development (MARD).

In the nine months of 2018 so far, Vietnam earned US$1.4 billion from shipping rubber to foreign countries, down 11.4% in value and up 9.1% in volume year-on-year.

According to the MARD, the rubber market is facing many difficulties. To avoid dependence on the Chinese market, rubber producers and exporters should diversify their products and expand their export markets, with special focus on India.

The MARD noted that floods in India have caused great damage to its own rubber supply sources in recent months. Indian authorities have stated that their domestic rubber manufacturing industry will not see a quick recovery.

Furthermore, a tough time is predicted for rubber exports in the near future. Tran Thuy Hoa, general secretary of the Vietnam Rubber Association (VRA) has advised groups involved in the industry to limit supply and production expansion.

She said that the supply from small-scale rubber plantations account for nearly 62% of the country’s total output.

“These groups’ knowledge of the supply and demand remains limited so the VRA and relevant authorities will need to deal with these difficulties to manage supply,” she said.

According to Hoa, the supply is currently higher than the demand so the price had fallen, causing difficulties for the whole supply chain, including hundreds of thousands of workers and about 260,000 rubber growing households.