Vietnam now has the fourth-highest trade surplus with the United States, lower only than China, Mexico and the European Union.
The increasingly symbiotic relationship emerges from trade, customs and investment data reviewed by Reuters from the United Nations, the U.S., Vietnam and China, and is confirmed by preliminary estimates from the World Bank and half a dozen economists and supply chains experts.
It shows that Vietnam’s export boom has been fuelled by imports from neighbouring China, with inflows from China almost exactly matching the value and swings of exports to the United States in recent years.
In preliminary estimates shared with Reuters, the World Bank reckons a 96% correlation between the two flows, up from 84% before Donald Trump’s presidency.
“The surge in Chinese imports in Vietnam coinciding with the increase in Vietnamese exports to the U.S. may be seen by the U.S. as Chinese firms using Vietnam to skirt the additional tariffs imposed on their goods,” said Darren Tay, lead economist at research firm BMI, noting that could lead to tariffs against Vietnam after U.S. elections.
The growing trade imbalance comes as Vietnam seeks to obtain market economy status in Washington after President Joe Biden pushed to elevate diplomatic ties with its former foe.
At over $114 billion last year, U.S. imports of goods from Vietnam were more than twice as big as in 2018 when the Sino-American trade war began, which boosted the Southeast Asian nation’s appeal among manufacturers and traders who sought to reduce risks linked to China-U.S. tensions.
Another reason Vietnam is drawing U.S. scrutiny is its exposure to Xinjiang, the Chinese region from where the U.S. bans imports over accusations of human rights violations against minority Uyghurs.
Xinjiang is China’s main source of cotton and polysilicon used in solar panels. Both are key for Vietnam’s industry, whose exports of cotton apparel and solar panels accounted for about 9% of exports to the U.S. last year.
Vietnam is the country with the highest volume of shipments by value denied entry into the U.S. over Uyghur forced labour risks, according to U.S. customs data.
Vietnam’s import of raw cotton from China fell by 11% last year to 214,000 tons, but it was roughly twice as big as in 2018.
China also exported to Vietnam at least $1.5 billion-worth of cotton apparel, up from nearly $1.3 billion in 2022. Meanwhile, U.S. imports of cotton clothes from Vietnam fell by 25% to $5.3 billion last year, according to the data, which may not include all cotton items.
The fall in U.S. imports came as Vietnam last year surpassed China as the main exporter of products covered by the Xinjiang ban, said Hung Nguyen of RMIT.
As US hikes China tariffs, imports soar from China-reliant Vietnam | Reuters
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