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Vietnam relatively safer than ASEAN peers in trade war storm

Unlike most other ASEAN countries, who have been buffeted by the China-U.S. trade war, Vietnam could actually benefit from it.

A Vietnamese worker watches containers at a port.
A Vietnamese worker watches containers at a port.

The threat of an escalating global trade conflict is weighing on prospects for export-dependent economies like Singapore and Malaysia, while Indonesia and the Philippines face challenges funding their high levels of external debt as their currencies come under pressure from a rising U.S. dollar.

On the contrary, Vietnam’s geographical proximity to China and economic links with Beijing are paying dividends.

Facing cost pressures created by U.S. trade tariffs, Chinese manufacturers are starting to shift production away from the mainland into cheaper Asian locations such as Vietnam and Bangladesh.

“A lot of companies are relocating,” said Robert Subbaraman, head of emerging markets economics at Nomura.

Angelo Cheung, a Hong Kong-based executive for Aoyagi, a Japanese electronics group that manufactures in China, told Financial Times that some orders from the U.S. had already been halted because of the increasing uncertainty. Cheung said his company is considering various options including moving part of its supply chain to Vietnam.

The Southeast Asian nation could be a “winner” if a lot of foreign direct investment shifts into Vietnam due to rising cost pressures from the U.S.-China tariffs, Bill Stoops, the chief investment officer of Dragon Capital, told CNBC.

Now with tariffs on made-in-China products set to rise, nations like Cambodia and Vietnam turn out to be more attractive than ever for U.S.-based consumer-goods makers that have factories in China, according to Bloomberg. Some of the names on the list are now Steven Madden Ltd., Tapestry Inc.’s Coach and Vera Bradley.

The U.S. and China have imposed tariffs on $50 billion of each other’s goods since July as trade frictions between the world’s two biggest economies worsened, despite several rounds of negotiations.

President Donald Trump has criticized China’s record trade surplus with the U.S. and has demanded that Beijing cut it immediately, threatening further tariffs on an additional $200 billion worth of goods – and possibly more.