The impact of the us china trade war on the import and export industry in vietnam

hkt, 2019 "Exchange rate" is the exchange rate between two currencies The exchange rate is commonly used to calculate the value of international trade transactions, foreign investment, a

HO CHI MINH CITY UNIVERSITY OF ECONOMICS AND FINANCE

I Introduction

The US and China are the two largest import-export markets in the world, and the main markets

of export-export companies in Vietnam But in 2018, the world witnessed the outbreak of the US-China trade war, marking a new step in the bilateral relationship between the world's two largest powers This trade war not only has a huge impact on the global economy and regional politics but also affects the global supply chain, causing difficulties for importers and exporters around the world, including foreign countries domestic importer and exporter

Therefore, understanding and assessing the risks and impacts of this trade war is more urgent than ever This essay was written to identify the positive and negative effects on importers and exporters in Vietnam during the US-China trade war In this essay, we will understand which influences will threaten or create new opportunities for importers and exporters, which industries

in Vietnam are most affected, and how they will use them How to use strategies to take advantage of opportunities and minimize risks during the US-China trade war

Through this essay, we hope to have an objective view and better understand the impact of the US-China trade war on importers and exporters in Vietnam

Due to limited potential, there are still shortcomings in my group's essay I look forward to your contributions to make the essay more complete

Sincerely thank

Table of contents

L IntrodUucfIOT - c1 2212111531211 153111 11531111113 111 1113 1111111111111 11111111 E11 T1 25111 E11 kh 2

IL Literature review cccccccccccccccccsecsscesecsceessesaecseeaecsaeaecsseaecaesaeesaescaeecusesesaeentaeeeaens 5

Part 1: Introducing the causes of the UIS-Chíma trade WaT 2 2 2 2222222 ssey 9

> The theft of technological secrets from Ámerican CoIDAHÍ€S: 55-555 e5 ss°2 11 Part 2: The impact of the US-China trade war on the financial market and Vietnamese 0505 13 2.1 Impact on Vietnam's financial and monetary markef: - - 55-55: 13 2.2 Impact on foreign đirecf investment in Viefnam: 2c cà s2 14

2.4 Exchange rate movements between the US dollar and the yuan: 16

Part 3: Opportunities and challenges of import-export businesses in Vietnam during the

3.1 Opportunifies for imporfers and exporters in Viefnam: - - 20

3.2 Challenges of imporfers and exporfers in Viefnam: .-5 2-5 c2 c5 s52 23

II Literature review

Before the 1980s, although the concept of competitive advantage was commonly used, it was still relative and did not have a clear definition Research and work on business strategy during this period often focused on the specific strengths and weaknesses of companies, such as Andrews (1971), or only vaguely mentioned the advantages and disadvantages of companies , disadvantages in business spot complete in some cases ambiguous, as in Penrose (1959), or use the term to describe what a company must have to compete effectively, as in Ansoff (1965) (hkt, 2019)

In his 1979 study, Michael Porter still does not mention the concept of competitive advantage, but focuses mainly on describing business positioning strategies in the context of five market forces (Porter, 1979) It was not until Porter's work "Competitive Advantage" was published in

1985 that this concept was introduced and widely understood in the popular form it is today Although the concept had previously attracted the attention of many researchers, there was no unified definition until Porter first introduced the term in 1985 He described: “Competitive advantage is at the heart of efficiency in competitive markets However, after several decades of strong growth, many companies have lost their competitive advantage in the race for growth and diversification Today, the importance of competitive advantage is enormous Global companies face slow growth and fierce competition from domestic and international competitors, while their market share is no longer large enough for everyone” (hkt, 2019)

Competitive advantage according to Porter is divided into two main types: low cost advantage and differentiation advantage Low-cost advantage is achieved when a company offers comparable values or features to its competitors but at a lower cost Meanwhile, differentiation advantage occurs when a company offers superior values or features compared to competing products and services This difference is “something unique that customers value more than a low price” (Porter, 1985) A company is considered differentiated if it creates a product or service that competitors cannot create or possesses a resource that competitors do not have Customers are willing to pay a higher price to obtain that product or service (hkt, 2019) Understanding competitive advantage has opened a new direction in business strategy, helping companies become more aware of the factors that determine success in a competitive market

This concept not only helps companies clearly identify the strengths that need to be promoted, but also helps them better understand the weaknesses that need to be overcome to maintain and improve their competitive position Applying competitive advantages to business practices also requires companies to continually improve, innovate, and adapt to market fluctuations (hkt,

Furthermore, the concept of competitive advantage also motivated the development of many other strategic models and tools, such as the value chain and Porter's Competitive Analysis Model and many other strategic analysis tools These tools help companies better understand the internal and external factors that affect competitiveness, thus creating more effective and flexible business strategies (hkt, 2019)

"Exchange rate" is the exchange rate between two currencies The exchange rate is commonly

used to calculate the value of international trade transactions, foreign investment, and other financial activities (According to Clause 3, Article 2 of Circular No 179/2012/TT-BTC

explaining the exchange rate)

YTD: Year-to-date (YTD) is a period, starting from the beginning of the current year and continuing up to the present day

Bank rate: The interbank rate is the value of a country's currency when converted to the value of another country's currency Exchange rates are usually only applied when there are financial transactions made between countries For example, the exchange of goods between countries, investment or the transfer of currency across borders

FDI: stands for Foreign Direct Investment, which is understood as a source of investment capital from abroad This is a form of investment that foreign businesses, organizations, or individuals

make by buying shares, establishing subsidiaries, joint ventures, or opening branches in another

country FDI is considered an important source of capital, contributing to promoting economic growth, creating jobs, improving competitiveness and international integration of host countries Black market exchange rate: is the exchange rate for buying and selling foreign currencies of gold shops and foreign currency exchange shops Normally, the buying rate at black market locations is always higher than the official exchange rate of banks

Import substitution: This is the economic theory that countries should reduce their dependence

on imports by boosting domestic production Trade wars can stimulate countries to ramp up domestic production to replace goods affected by tariffs or trade restrictions

Comparative advantage: This theory, put forward by David Ricardo, argues that countries would benefit if they specialized in the production of goods with which they had a comparative advantage, and exchanged these goods with each other Trade wars can create opportunities for other countries to replace China or the U.S as primary suppliers of certain products or services Concept and role of international trade:

International trade is the process of exchanging goods, services and resources between countries

It plays an important role in promoting economic growth, creating jobs and improving quality of life International trade helps countries take advantage of their comparative advantages, access larger markets and promote competition (Team, n.d.)

Trade war: concept and operating mechanism

A trade war is a situation in which countries impose tariffs and trade barriers on each other to protect domestic industries or in retaliation for similar actions by another country These measures include high tariffs on imports, quotas, embargoes and other non-tariff measures Trade

wars often lead to reduced international trade, increased prices of goods and services, and

destabilization of the global economy (BBC, 2019)

Theory of risk and uncertainty in international business

Risks in international business include exchange rate risk, political risk and market risk In the context of a trade war, political risks increase when trade policies change suddenly and unpredictably Uncertainty in international business increases costs and reduces the operating efficiency of import-export companies

Global supply chains and the impact of trade wars:

Global supply chains involve the production and distribution of goods around the world It includes suppliers, manufacturers, distributors and consumers Trade wars cause disruptions in global supply chains, increasing production and transportation costs and reducing companies’ competitiveness (Michael Wolf, 2021)

Information asymmetry theory and countermeasures:

Asymmetric information occurs when one party to a transaction has more or better information than the other party In the context of a trade war, import and export companies may find it difficult to predict new trade measures and assess their impact To solve this situation, companies need to improve their ability to collect and analyze information, strengthen strategic partnerships and diversify markets (MR.LUAN, 2020)

Impact of the trade war on small and medium enterprises (SMEs)

Small and medium-sized enterprises are often less capable than large enterprises in responding to fluctuations and risks of international trade Trade wars create new trade barriers, increase costs and reduce market access for small and medium-sized enterprises Support policies from the Government and international organizations are needed to help small and medium-sized enterprises overcome this challenge

Business response strategies in the context of trade war

Companies can pursue a variety of strategies to respond to the trade war, including diversifying export markets, finding alternative sources of supply, increasing production efficiency, and promoting research and development ( R&D) D) to create products of higher value Flexibility and the ability to adapt quickly are vital for companies to maintain a competitive advantage in a volatile landscape

Il Analysis contents Part 1: Introducing the causes of the US-

China trade war

On July 6, 2018, the US government officially "launched" the trade war with China by imposing

a 25% tax on 818 items imported from this country worth 34 billion USD into the US market China immediately responded by imposing a 25% tax on 545 products imported from the US This move has caused trade tensions between the world's two largest economies (Chién tranh thương mại Mỹ - Trung: Nguyên nhân và phương thức các nước áp dụng, 2018)

After becoming US President in January 2017, Mr Donald Trump repeatedly threatened to apply strong measures to retaliate against China in the field of trade In fact, since Mr Trump came to power, the two sides have conducted negotiations to seek agreements and concessions but were

unsuccessful

On July 6, 2018, the US government officially announced a 25% tax rate on 818 imported goods from China worth up to 34 billion USD, mainly in high-tech fields such as robotics and technology information technology (semiconductor chips, computer drives), aerospace, printers, motorbikes Immediately afterwards, China responded by imposing a 25% tax on 545 items imported from America (mainly agricultural products such as soybeans, sorghum, beef, cotton, seafood ) with a total value of 34 billion USD (Chién tranh thuong mai My - Trung: Nguyên nhân và phương thức các nước áp dụng, 2018)

In recent years, the competition between these two superpowers has become increasingly tense America's power shows signs of decline, while China increasingly shows its ambition to replace the United States in a dominant position on the world geopolitical chessboard

1.2 Direct reasons:

> America's large trade deficit with China:

Trade tensions between the US and China are said to be directly caused by the US trade deficit While it exported only $131 billion worth of goods to China in 2017, the US imported $506 billion worth of goods from the country Because of this, the US and China currently have a trade gap of up to 375 billion USD This number shows a significant difference in the trade balance between the two countries (Chiến tranh thương mại Mỹ - Trung: Nguyên nhân va phương thức các nước áp dụng, 2018)

It is worth noting that the US trade deficit with China is not a new phenomenon In fact, since China joined the World Trade Organization (WTO) in 2001, this deficit has increased steadily The US trade imbalance with China was then only at 100 billion USD but increased sharply to

375 billion USD in 2017 (Chiến tranh thương mại Mỹ - Trung: Nguyên nhân và phương thức các nước áp dụng, 2018)

The US government has repeatedly asked China to reduce its trade imbalance with the US because of this situation By readjusting the balance of trade, these regulations hope to improve trade equity On the other hand, China believes that the US must export more to narrow the trade gap China believes that increasing exports from the US and increasing competitiveness in the global market will help the US reduce its trade deficit with China

One of the main factors contributing to the trade war between the world's two largest economies

is disagreements over trade imbalance Although each side has its own arguments and arguments, differences in how they handle trade-related issues have increased tensions For both the United States and China, finding a fair and acceptable way to balance their trade continues to

be a significant difficulty

> Copyright infringement is serious in China

In addition, the US has repeatedly accused China of serious intellectual property rights infringement, especially against the copyrights of US companies The US government believes

that American companies lose billions of dollars each year due to the theft of Chinese trade secrets This stems from the Chinese legal system's very weak ability to protect intellectual property rights (Chién tranh thương mại Mỹ - Trung: Nguyên nhân và phương thức các nước áp dụng, 2018)

Although China is currently promoting the protection of intellectual property rights, most progress has focused on copyright and trademarks, while forced technology transfer in other fields Key industries are still widespread

> The theft of technological secrets from American companies:

While tensions were escalating between the two superpowers America and China, in December

2018, Phillips 66 (Phillips 66 company in Bartlesville, Oklahoma, USA) contacted the Federal Bureau of Investigation (FBI) to report Tan about theft of company trade secrets At the same

time, many of Tan's colleagues told him that he would return to China, however, he was arrested

before doing so “Tan's behavior continues to show us the full picture of Chinese intellectual property theft,” said John Demers, Assistant Attorney General of the Department of Homeland Security (Céng dan Trung Quốc ăn cắp bí mật tỉ USD của Mỹ, 2019)

Huawei, one of China's leading technology corporations, was accused by US prosecutors of carrying out a systematic campaign to steal T-Mobile's technology secrets Specifically, the case started in 2012, when Huawei tried to steal information about T-Mobile's phone testing robot design, named "Tappy" Tappy is a robot designed to test the durability and performance of cell phones, and this technology is considered a valuable asset for T-Mobile (Vu danh cap céng nghé

khiến Huawei bị Mỹ truy tố, 2019)

According to the indictment of the US Department of Justice, Huawei carried out a series of

fraudulent actions and conspiracies to collect information about Tappy Huawei engineers sent a number of employees from China to the US with the mission of secretly taking photos and collecting information about Tappy These employees were required to use every possible method to obtain information, including disassembling part of the robot and taking it away without T-Mobile's permission This action seriously violates regulations on protecting trade secrets and intellectual property rights in the US

The situation became more serious when Huawei engineers were found to have committed these illegal acts Instead of accepting responsibility, Huawei sought to avoid it by claiming to have fired the relevant employees and conducted an internal investigation However, the US

Department of Justice holds a lot of evidence, including Huawei's emails and internal documents,

proving that this corporation has organized and encouraged illegal acts According to these documents, the theft of technology secrets is not a spontaneous action of a few individuals but is part of a systematic campaign directed by Huawei leaders

On January 28, 2019, the US Department of Justice announced two indictments against Huawei, including the theft of technology secrets from T-Mobile These indictments are part of a larger legal battle between the US and Huawei, in the context that the US government is imposing many restrictive measures on Huawei and other Chinese technology companies These measures include banning Huawei from accessing US technology and products, as well as pressuring US allies not to use Huawei equipment in their telecommunications systems (Vu danh cap céng nghệ khiến Huawei bị Mỹ truy tố, 2019)

This case is not only a violation of international law on intellectual property but also a clear manifestation of the fierce competition between the world's two largest economic powers The

US has repeatedly accused China of violating intellectual property rights, especially copying technology from US companies The US government believes that their companies lose billions

of dollars each year due to the theft of Chinese trade secrets These actions are said to stem from the Chinese legal system's very weak ability to protect intellectual property rights The US has strongly criticized that intellectual property law enforcement mechanisms and measures in China are not strong enough to protect the interests of foreign companies

Although China is currently stepping up intellectual property protection with many reforms and campaigns to increase awareness and compliance, most of the progress has been in the area of copyright Counterfeit goods and trademarks These improvements have helped reduce violations

in areas related to art and branding, but have not fully addressed the problem of forced technology transfer in key industries This situation remains widespread, especially in key industries such as high-tech, manufacturing and defense, where access to advanced technology from foreign companies is seen as a means to promote promote domestic development

The consequence of these actions is dissatisfaction from the US and large technology companies, along with concerns about national security The US is concerned that stolen technologies not only cause economic damage but can also be used to develop products that directly compete with

US products, even products that can compete with American products threaten US national security This is why the US government has taken strong measures to limit the activities of Huawei and other Chinese technology companies in the global market

Part 2: The impact of the US-China trade

war on the financial market and Vietnamese businesses

2.1 Impact on Vietnam's financial and monetary market:

The US-China trade war has increased tensions not only between the world's two largest economies but also has a strong impact on the global economy, and Vietnam is no exception to this spiral On the positive side, Vietnam is one of the 5 countries where the US has the largest

trade deficit, with more than 38 billion USD in 2017 Products that the US taxes on imports from

China are all part of the country's export strengths of Vietnam, creating a good opportunity for Vietnam to dominate market share In addition, when the USD appreciates and the yuan depreciates, Vietnam's exports in the short term will be more profitable, because VND is mainly pegged to the USD price In addition, foreign direct investment (FDI) flows into Vietnam may also increase, in the context that FDI flows into countries highly taxed by the US tend to slow down (trungtamwto.vn, n.d.)

However, Vietnam will also face some adverse impacts from the US-China trade war Vietnam's economy, although small, is highly open and depends heavily on import and export, of which China and the US are Vietnam's two largest foreign trade partners When two major partners have conflicts, Vietnam's import and export activities will be affected Chinese goods being restricted from being exported to the US could lead to a surplus and flood into the Vietnamese market, putting competitive pressure on Vietnamese businesses On the contrary, exporting

domestic goods In addition, there is also the risk of China assembling products and labeling

them "Made in Vietnam" to evade US taxes, and if Vietnam does not strictly control this issue, it

is likely that the US will impose sanctions sanctions similar to those against China

The US-China trade war also has a strong impact on Vietnam's financial and currency markets

As for the Vietnamese stock market, after setting a record in April 2018, it is on a sharp downward trend with foreign investors continuously withdrawing net capital, regardless of the economy The economy is experiencing positive changes such as: stable macroeconomics, low inflation, high foreign exchange reserves and continued increase in FDI capital flows In less than a month (from July 6 to July 27, 2018), foreign investors continuously sold net on both stock exchanges with a total value of nearly 1,669 billion VND It is expected that this situation will continue, investors tend to delay investment projects because the trade war is expected to last longer (trungtamwto.vn, n.d.)

The decline of Vietnam's stock market is also due to a number of other reasons such as: the US Federal Reserve (FED) increased interest rates; Sovereign wealth funds (SWF) are selling off their investments in emerging markets, including Vietnam For the currency market, VND has continuously increased in value compared to CNY and depreciated compared to USD since April

2018, especially after the US-China trade war broke out, causing greater price fluctuations compared to previous months The VND/USD exchange rate continuously increased, especially

in July and early August 2018, when US-China trade tensions increased (trungtamwto.vn, n.d.) Many forecasts show that in the coming time, the VND/USD exchange rate will continue to be indirectly affected by the US-China trade war, mainly due to: USD continuing to strengthen; Foreign investment capital flows are at risk of capital withdrawal due to the appreciation of the USD; China continuously devalues the yuan as a solution to deal with US trade policy Thus, the US-China trade war is not only a confrontation between the world's two largest economies but also entails many complex consequences for other economies, including Vietnam Opportunities and challenges both exist, requiring Vietnam to have timely and effective response measures to maintain stability and economic development in a volatile global context

2.2 Impact on foreign direct investment in Vietnam:

With an open business environment, security, and stable politics, Vietnam is considered an

attractive destination for foreign investors In fact, the first 9 months of 2019 have clearly proven this Specifically, realized foreign direct investment (FDI) in 9 months was estimated at 14.2 billion USD, up 7.3% over the same period last year As of September 20, 2019, Vietnam has attracted 2,759 new licensed projects with a registered capital of more than 10.9 billion USD, the number of projects increased by 26.4% and the capital decreased by 22.3% registered compared

to the same period in 2018 (Chiến tranh thương mại Mỹ - Trung và vấn để đặt ra đối với kinh tế Việt Nam, 2019)

In addition, there were 1,037 projects licensed from previous years registered to adjust

investment capital with an additional capital of 4,789.8 million USD, down 13.6% over the same

period last year Thus, the total newly registered and increased capital in the first 9 months of this year reached more than 15.7 billion USD, down 19.9% compared to the same period in

2018 In the first 9 months of 2019, Korea was the investor largest investment capital with more than 2.09 billion USD, accounting for 19.1% of total newly registered capital; Next is China with

more than 2.02 billion USD, accounting for 18.4%; Japan with more than 1.5 billion USD,

accounting for 14.4% (Chiến tranh thương mại Mỹ - Trung và vấn để đặt ra đối với kinh tế Việt Nam, 2019)

These numbers show a significant change in investment trends and reflect Vietnam's attractiveness to foreign investors Vietnam not only attracts FDI thanks to a stable business environment and effective investment support policies, but also thanks to efforts to improve infrastructure and improve the quality of human resources This creates a solid foundation for sustainable economic development in the future, while opening up many job opportunities and improving living standards for people in the country

2.3 Restricting exports from China to the US: Potential impact on Vietnamese businesses:

> Excess goods:

The US-China trade war has been causing significant disruptions to the export of goods from China to the US This has led to some concerns about the potential impact on Vietnamese businesses, such as overabundance of goods The imposition of high tariffs and other restrictive measures on Chinese goods could cause a backlog of exports to the US This could lead to a