Daily Management Review

Southeast Asia Set To Benefit From U.S.-China Trade War


Southeast Asia Set To Benefit From U.S.-China Trade War
The manufacturing, textile, and seafood industries of South East Asia could benefit from the ongoing U.S.-China trade war as companies scourge possible business opportunities in the region.
This is one of the reasons that High Point, N.C.-based Stanley Furniture was pointed out by Walter Blocker earlier this year as a potential source of benefit. According to his estimation, the company would be benefited by placing its production process in Vietnam as and beat the more expensive Chinese furniture on price because of the trade tariffs imposed by the US.
“This is better than TPP for Vietnam,” Blocker told the media referring to the rehashed Trans-Pacific Partnership trade deal which is not known as the Comprehensive and Progressive Agreement. “This furniture business is going to be amazing.”
The South East Asian region is facing growing anxiety because of the threat of the trade war causing a global economic slowdown or disturbances in the shipping routes that link the region to the US. While on the other hand, Southeast Asian exports to both US and China could increase because of the trade tension between the two countries. This has made the region an attractive proposition and potential for setting up production facilities.
“Everybody’s hedging their bets,” said Jeff Williamson, director of the California State Trade Expansion program, to highlight the reason why many companies are seeking to relocate production units to Southeast Asia economies. .
The potential opportunities for Southeast Asian manufacturers are showcased by the furniture industry.
Almost the entire scale of $32 billion worth of furniture exported to the U.S. each year from China was covered in the third round of sanctions by the US on September 24. This could result in doubling in the growth of the $5.3 billion in furniture exports to the U.S. from Vietnam, Blocker predicted.
“Our company is very well-suited to take advantage of the circumstances,” Blocker said about Stanley which is a Nasdaq-listed furniture company.
There are emerging signals that South East Asia is benefiting from the U.S. tariffs on Chinese textiles and apparels.
There was a 11.3 per cent year-on-year growth in August 2018 in the imports of clothes, shoes and bags from Vietnam to the US. In comparison, growth was largely flat for Chinese exports of textiles and apparel. Those goods have been brought under the latest U.S. tariffs.
“Vietnam is still far behind China,” said Tuyet Mai, deputy secretary general of the Vietnam Textile and Garment Association. “But if there are tariffs [on China], of course Vietnam will export more, U.S. companies will buy more from Vietnam.”
The trade war can also result in Chinese manufacturers choosing Southeast Asian countries as their production hubs because of lower costs and tariff restrictions.
ASEAN has been eyed for years by manufacturers in China because of lower costs for some, and benefits emerging out of the revised TPP trade pact on the other because it has been signed by 8 South East Asian countries excluding China.
There are clients who are transferring production of plywood from Chine to Vietnam because of the US tariffs, said Duong, managing partner at the TDL International Law Firm.