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U.S. - China Trade War Solution: Vietnam



As the tensions between the two largest economies - the US and China rumble on, global markets wait with baited breath and hope that the latest truce leads to long term stability.

However for one country, the response to the economic turmoil is: Bring it on! Yes that is how I imagine Vietnam feels about the ongoing US-China trade dispute.

Several multinational firms with bases in China are beginning to raise doubts about the viability of maintaining production in China with the current tariffs and counter tariffs.

In fact questions about keeping production in China had already started before the latest tensions, due in particular to growing labour and production costs in China. Labour costs have gone up by about 60% since 2011.

The trade war has turned those questions into an exodus from China to Vietnam, with companies like Brooks Running, which is part of Warren Buffet's Berkshire Hathaway, moving the major part of their operations - with about 8,000 jobs to Vietnam because of the tariffs.

In response to the influx of companies, Vietnam, which like China has a communist one party system of government, is putting in a lot of effort into increasing the capacity of local manufacturers in order to remain attractive to investors.

In the first quarter of 2019 there has been an increase in investment in Vietnam by 82%, with an economy that grew by 7.1% in 2018. There are still challenges for firms relocating production to Vietnam, including the availability of capable manufacturers that fit your product. You will also have to factor in the costs of relocating your supply chain.

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