Vietnam – U.S. Trade Relations: On Steady Rise

11:32:31 AM | 4/7/2019

Twenty-five years after the United States lifted its trade embargo on Vietnam, the two-way trade value has increased by nearly 120 times, from US$450 million in 1994 to over US$60 billion in 2018. The U.S. has been the largest export market of Vietnam for years and Vietnam is one of the fastest-growing export markets for the U.S.

Impressive growth

According to data from the Ministry of Industry and Trade, since Vietnam and the U.S. signed the Bilateral Trade Agreement in July 2000 (which came into effect in December 2001), the two-way trade value has made stunning growth. Especially, in 2018, Vietnam's stateside exports valued US$47.5 billion, 14.2% higher than a year earlier and its imports from the U.S. reached US$12.8 billion, up 36.7% year on year. The U.S. market accounted for 19.52% of Vietnam’s total exports. Vietnam enjoyed a trade surplus of US$34.8 billion with the U.S. in 2018, equaling 73.2% of Vietnam's exports shipped to the U.S.

According to the United Nations Comtrade Database (UN Comtrade), the U.S.’s exports valued US$1,784 billion in 2017 and Vietnam was the 31st importer of American goods, accounting for only 0.5% of the former’s total exports. In 2017, the U.S. imported US$2.407 billion worth of goods from the world and Vietnam ranked 12th, accounting for 2% in the former’s total import value, said UN Comtrade.

Vietnam’s 10 largest exports to the U.S. valued US$40.58 billion in 2018, accounting for 85.4% of its total shipments to the world’s largest economy. Garment and textile shipments reached US$13.7 billion in the year, up 11.6% over 2017. Footwear came second, raking in US$5.82 billion, up 13.9%, followed by telephones US$5.41 billion (up 46.1%), wooden furniture US$3.9 billion (up 19.3%) and machinery US$3.4 billion (up 40.3%).

In 2018, the total value of 10 top imports from the U.S. reached over US$8.97 billion, accounting for 70.4% of its imports from the world’s largest economy. Vietnamese companies imported US$3.1 billion worth of computers, electronic products and parts from the U.S., 9.6% higher than in 2017. Other big imports included cotton worth US$1.47 billion (up 24.6%), and machinery and equipment with US$1.05 billion (up 3.9%).

According to the General Department of Vietnam Customs, in 2018, nearly 7,200 Vietnamese enterprises exported goods to the world's largest market, up 7.6% over 2017. Meanwhile, importers from this market outnumbered exporters. Specifically, in the year, 13,200 companies imported goods from the U.S., 6.3% more than a year earlier.

Vietnam’s trade value was estimated at US$202.02 billion in the first five months of 2019, of which exports accounted for US$100.74 billion, up 6.7% year on year. By export market, the U.S. was the largest export market in the period with US$22.6 billion, up 28% from a year ago. Notably, telephone and parts export rose by 109.2% year on year; electronics, computers and components by 58.4%; and textiles and garments by 9.8%.

The visits to Vietnam by the U.S. President in 2017 and 2019 also brought billion-dollar business agreements with American businesses. Meanwhile, Vietnam has advocated improving the investment environment for US businesses in Vietnam and meeting concerns of U.S. companies regarding automobile import, cybersecurity, electronic payment, finance and monetary.

Removing barriers to development

Although the Vietnam - U.S. bilateral economic relations have developed well, some industries like seafood, agricultural products and foodstuffs have faced many nontariff barriers in the face of strict regulations and standards that result in rising production costs for businesses and weakening competitive advantages.

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), 90% of catfish products sold in the U.S. in the past 10 to 15 years, were imported from Vietnam but they have been subject to inspections by the U.S. Department of Agriculture since August 2018. In May 2019, the U.S. Department of Commerce (DOC) increased anti-dumping duty on Vietnamese pangasius in the final round of the 14th period of review (POR14) of Vietnamese pangasius shipments imported into the U.S. from August 1, 2016 to July 31, 2017. These regulations will raise barriers to Vietnamese exporters.

According to experts, the escalating trade dispute between the U.S. and China is certainly pushing U.S. manufacturers to move their production bases from China to Southeast Asia, especially Vietnam. Advantageously lying near China, providing low-cost labor and a better business environment, and, at the same time, being one of the fastest growing countries in the world and entering into many new-generation free trade agreements (FTAs) ​​that bring a lot of tariff preferences from big economies, Vietnam has the opportunity to expand export markets with major partners, especially the United States.

Exported apparels, footwear, agricultural products and woodworks are projected to benefit most from these pacts. Surpassing U.S. barriers shows that businesses are paying more attention to improving product value and meeting international standards.

Huong Ly