Reuters
- Companies are evading US tariffs on Chinese goods by rerouting them through Vietnam.
- The duty dodging, combined with Vietnam’s hefty trade surplus, could spur Trump to slap tariffs on the Southeast Asian nation.
- "Vietnam takes advantage of us even worse than China," Trump said in an interview on Wednesday, adding the country was "the single worst abuser of everybody."
- View Markers Insider’s homepage for more stories.
Companies are evading US tariffs on Chinese goods by rerouting them through Vietnam, according to the Wall Street Journal. The duty-dodging, combined with Vietnam’s hefty trade surplus, could spur President Donald Trump to slap tariffs on the Southeast Asian nation.
"The phenomenon of trade fraud through labeling of the origin of goods as being produced in Vietnam is increasing," the Vietnamese Ministry of Industry and Trade told the Journal. Companies have been importing Chinese goods, relabeling them as "Made in Vietnam," then exporting them to the US and elsewhere, Vietnam’s customs agency told the paper.
Vietnam’s exports of computers and electronics to the US surged 72% to $1.8 billion in the first five months of this year, and its imports of those goods from China soared 81% to $5.1 billion, according to its latest trade data.
Exports of machinery and equipment to the US rose 54% over the same period, while imports of those products from China jumped 29%.
Those increases far exceeded the growth in Vietnam’s worldwide imports and exports of those goods, suggesting businesses are turning to "transshipments" or sending Chinese goods to Vietnam then to the US.
The Trump administration has punished the practice. Last year it imposed duties of more than 250% on some Vietnamese steel exports after discovering they contained "a significant portion" of Chinese steel, according to Reuters.
Vietnam has benefited from the US-China trade war as companies see it as an alternative to China. Apple, Foxconn, Sharp, Williams-Sonoma, Lovesac, and others have shifted production from China to Vietnam in order to evade tariffs. However, Trump has hinted he could slap tariffs on Vietnam given the nation’s trade surplus with the US of $40 billion last year, and its failure to prevent trade fraud could prompt him to pull the trigger.
"A lot of companies are moving to Vietnam, but Vietnam takes advantage of us even worse than China," Trump said in an interview on Wednesday, adding the country was "the single worst abuser of everybody."
The harsh rhetoric could prompt businesses to rethink their exodus from China to Vietnam.
"You can almost hear the screech of brakes in shifting global supply chains, and in US-Vietnamese geopolitical relations (and thus the screams from the Pentagon)," said Michael Every, senior Asia-Pacific strategist at RaboResearch.
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Source: Business Insider – tmohamed@businessinsider.com (Theron Mohamed)