immediate disadvantage, the confidence in a bright future of the economy is

quite stable. While the China side is still passive and reacts negatively, the
disadvantages are clear.
Affects the rest of the world
Nowadays, the world trading system is being organized in production chains
located in many countries, so the risk is the spillover effect to the world economy,
not just the stop in a group of countries have war with each other. South Korea,
Malaysia, Taiwan and Singapore will be the countries most at risk because of high
trade openness and high participation in the supply chain. According to the
Peterson Institute for International Economics, two-thirds of US imports from
China come from foreign-invested companies, thus affecting other countries
investing in China, including the United States and Japan and Korea.
It is worrying that trade protectionism, which favors nationalism, will return
while the world is looking to liberalize global trade. This is considered a step
backward of the world economy. Looking back on the history of past trade wars
has led to economic stagnation: The United States' Smoot-Hawley Tariff was
announced in 1930, creating a commercial war that led to a serious decline global
trade. World trade dropped by 66% between 1929 and 1934, and imports from the
US to Europe fell by two thirds.
In addition, the problem of borrowing of origin will become increasingly serious,
distorting the production as well as causing complications in the foreign trade of
the country. There will be a problem of anti-circumvention, which is the flow of
Chinese capital to invest abroad to avoid sanctions from the United States.
On the other hand, trade war is not limited to taxes, but also involves
technology licensing, monetary policy, credit ... The consequences of trade war can
also lead to a War on currency devaluation to scramble for export market. The fact
that recent devaluations of the yuan may trigger a currency war when currencies
continue to depreciate.
Impacts on the Vietnamese economy
Positive influences
Vietnam is among the top five countries which US has the largest trade
deficit in the world with more than $ 38 billion in 2017. The products which US
get import tax from China, including: textiles, leather and footwear, iron, steel,
building materials ... are the items in the export strength of Vietnam. Therefore,
this is a good opportunity for Vietnam to gain market share. However, this is also
an opportunity to spread to other countries not only Vietnam.
On the other hand, when the USD appreciates, CNY will be favorable for
Vietnam's export in the short term because the dong is mainly anchored in USD. In
addition, in the context of difficult export, the trend of FDI in the taxed countries
will be affected and tend to slow down, will find new markets including Vietnam
as investors need to find a stable environment. Vietnam's economy has recently
grown positively, thanks in part to foreign direct investment (FDI). In the first half
of 2018, Vietnam's economic growth reached 7.08%, the highest level since 2011.
FDI growth in the first half of 2018 reached 8.4% over the same period, a record in
the past 10 years. Therefore, Vietnam needs to identify products that are
competitive to promote production and improve product quality in order to
participate in the supply chain.
Negative influences
According to ADB, Vietnam's annual trade turnover now exceeds 185% of
GDP, thus becoming Vietnam's second-largest trading dependency in Southeast
Asia, behind Singapore. The Vietnamese economy, although small but very open,
is heavily dependent on imports and exports 1, so adverse changes related to
imports and exports can become a concern for the Vietnamese market.

The most prominent is the withdrawal of emerging markets, including

Vietnam's stock market. In the last 3 months, the market lost $ 25.4 billion as
foreign investors continued to be net sellers, despite internal macroeconomic
stability, low inflation, high foreign exchange reserves while FDI still accounts for
about one fifth of GDP. Since the US official tax (July 6) to July 27 (July 27),
foreigners were net sellers on both exchanges with a total value of nearly 1,669
billion. Therefore, in the trade war, Vietnam faced the following difficulties:
Firstly, the volume of Chinese exports to the US is limited, leading to
surplus and to the Vietnamese market (due to geographical advantages, goods can
go through the small quota ...), so small businesses And Vietnam's hard to resist,
price competition for Chinese goods. While China dumped more than 3% of the
CNY against the dollar and there is room for devaluation. It is also not excluded
that low-end Chinese goods are labelling on exports to the US and rising prices
which make Vietnamese consumers vulnerable to fraud. This fact could lead to a
serious trade deficit from China. On the other hand, goods exported from Vietnam
to China will be more difficult because China must focus on domestic
consumption.
Secondly, China is promoting the idea of forming cross border economic
development zones where Chinese exporters can assemble products and label

1
In 2017, Vietnam exports $ 214 billion, imports $ 211 billion, while GDP is over
$ 220 billion. The United States is also Vietnam's largest export market with about
one fifth of total exports ($ 21.5 billion in the first six months of 2018). In addition,
Vietnam imported the most from China with about a quarter of total imports ($
31.1 billion). In 2017, the share of exports to China accounted for 16.5% of total
export turnover of Vietnam.
"Made in Vietnam" to avoid US taxes. . This is part of a broader cooperation plan
signed between Beijing and Hanoi in 2017, ambitious "road belt" strategy.
Currently, China and Vietnam have seven cross-border trade areas, the goods
produced here can bring Vietnam origin to avoid tax. Therefore, Vietnam should
abide by WTO rules on the origin of goods, requiring Vietnamese enterprises to
have sufficient knowledge and law on international trade to avoid unnecessary
consequences.
Thirdly, in the long run, sanctions may be extended to many other industries,
with tax evasion diverted to trace China's offshore investment in order to avoid US
sanctions. If it does not prove to be related to Chinese origin, Vietnam could be
punished. The US has investigated steel imports from Vietnam as a warning for
future investigations. Therefore, Vietnam needs to strictly control the importation
and exportation of goods to the US to eliminate origin from China.
The trade war between the United States and China is difficult to predict, but
the vulnerability to global trade is obvious, reflecting the weakening of multilateral
trading platforms, which Greater dependence on bilateral relations will make the
major economies more advantageous, while Vietnam is a small country, so it is
less advantageous to negotiate and to rely heavily on large countries. If the
tensions escalate and lengthen, it will cause delayed investment and production
activities, adversely affecting global economic growth, preventing FDI inflows to
other countries, including Vietnam.
Some recommendations for Vietnam
To actively respond to the negative impacts of this war, Vietnam needs to
invest more in human resources to build a new entrepreneurial community; To take
initiative in defending and orienting resources to develop the domestic market,
maintaining the growth engine; good organization of export sources, export
markets and organization of export; It is necessary to monitor the monetary and
financial markets in order to have appropriate exchange policies and reduce the
negative impact on export and import. In the medium and long term, it is necessary
to accelerate economic reform, improve the competitiveness of businesses,
promote free trade agreements with Europe and other countries to reduce
dependence on the United States and China. However, Vietnamese enterprises
need to be familiar with the trend of trade protection, especially for importing
markets; Much effort should be made to restructure production processes towards
investment in technology, meet international quality standards in order to meet
demanding import markets, actively seek for new import markets to avoid reliance
on existing customers, especially with those countries that have a tendency to trade
more and more.
References

1. “These Are the 128 U.S. Products China Is Enacting Tariffs On” . Fortune.
Visited 28th, June, 2018
2. “As China Fires Back in Trade War, Here Are the Winners and
Losers”. Bloomberg. 4th, April, 2018. Visited 4th, April, 2018.
3. “Trump imposes steel and aluminum tariffs on the E.U., Canada and
Mexico”. Washington Post. 31st, May, 2018
4. Washingtonpost.com 20 May 2018 / Heather Long: China is winning
Trump’s trade war (Analysis)
5. “Stark China warning to US over trade” . BBC News  3rd, June, 2018. Visited
6th, July, 2018
6. “Trump announces tariffs on $50 billion worth of Chinese goods”. CNN.
15th, June, 2018. Visited 12nd, July, 2018.
7. “China: 'The US has launched a trade war'” . cnn.com. 15th, June, 2018.
Visited 19th, July, 2018.
8. “Trump threatens China with new tariffs on another $200 billion of goods” .
CNN. 19th, June, 2018. Visited 21st, July, 2018.
9. “China hits back after US imposes tariffs worth $34 bn” . BBC. 6th, July,
2018. Visited 25th, July, 2018