It’s Complicated: China & Vietnam’s Relationship

What is happening between these two countries as Vietnam imposes tariffs on China’s products?

What Happened?

Vietnam’s industry and trade ministry on Wednesday said that the country has imposed anti-dumping duties on some coil or sheet cold-rolled steel products that originated from China for five years beginning December 28. The anti-dumping tax would range from 4.43% to 25.22%.

Why This Move?

This move comes after Vietnam concluded an anti-dumping probe that began in September last year. The probe found that cold-rolled steel imported from China reached 272,073 tonnes in the period, amounting for 65.5% of the total cold-rolled steel imports into Vietnam.

This figure shows that most of the cold-rolled steel that is used in Vietnam is not even made by industries in Vietnam. That’s why this move has been done by the country. The statement by the ministry said that the domestic manufacturing industry is under threat of considerable damages as key indicators such as profit, inventory and market share are poor.

Made In Vietnam Or China?

This move is not sudden either. Vietnam has consistently said that it would take measures on goods of Chinese origin illegally labelled “Made in Vietnam” by exporters. Also, the U.S Department of Commerce (DOC) began a circumvention inquiry into stainless steel sheets/strips. The products were sent from China to Vietnam where they were completed and then exported to the U.S.

This makes us ask two questions — Why was China illegally stamping “Made in Vietnam” on the products that were made in China? And Why was the U.S DOC conducting an investigation on the products that were being sent from Vietnam to the U.S?

The answer is that China was sending its products to Vietnam in order to avoid the countervailing duty (CVD) and anti-dumping duty (ADD) from China once they are imported into the U.S. In short, China didn’t want to pay the taxes.

Zooming Out

Tensions between China and Vietnam are not something new. In 1979, hundreds of thousands of Chinese troops crossed Vietnam’s northern border to invade the country. Even though things became slightly better between the two countries after 1990, the current incidents show that we might have a cold war brewing between China and Vietnam.

Despite all the tariffs Vietnam has imposed on China, the latter is still Vietnam’s largest trading partner for materials and equipment for its labour-intensive manufacturing sector. According to official data, Vietnam’s trade deficit with China reached $31.4 billion in the first 11 months of this year, marginally higher from the same period last year. Even with all the tariffs and penalties, Vietnam can not completely give up on China because Vietnam does a lot of trade with China.

So, we have to wait and see how China responds to these duties and will Vietnam continue to take a tough stance against China in the future?

Head to moneyguru’s Insight section to stay updated on all major financial news updates of the day!