Vietnamese factory braces for potential impact following Trump's tariff warning
Deep in the outskirts of Ho Chi Minh City, factory workers at Dony Garment are round-the-clock hustling. Ever since Donald Trump slapped a 46% trade tariff on Vietnam, they've been gearing up for a storm.
They're racing to dispatch orders to clients located across three U.S. states, bustling against time to finish as much as they can before Trump makes his final call. He might have hit the pause button on his "Liberation Day" tariffs for 90 days, but no one here is holding their breath.
Factory workers like Do Thi Anh are feeling the heat. "I have two kids to raise. If the tariffs are astronomical, the U.S. will buy fewer goods. That means less money for me, and I might not be able to support my kids either," she shares with a heavy heart.
Back in 2021, this forethought started brewing. With COVID wrecking havoc, they decided to broaden their market horizons. Previously, they used to export 40% of their garments to the U.S. Now, it's closer to 20%.
The upbeat owner of the company, Pham Quang Anh, tells me with a resilient grin: "We believe depending on just one or two markets is risky, so we took a hit on profits and invested in expanding our market share."
With a shrewd vision like this, they might just make it through the months ahead. But others aren't so fortunate.
Some of Mr. Pham's peers in the industry are neck-deep in America, having invested entirely in the U.S. market. If the 46% tariff unfolds, it could bury their businesses.
The world, and America, have transformed under Trump. The scorching heat of trade wars is still vaporizing industries, and the garment industry in Vietnam is no exception.
At the Saigon River's edge, affluent-looking Cuong, a finance professional, asks aloud: "Why should America be trying to snatch jobs from developing countries like Vietnam and other Asian countries? It doesn't make sense."
Yet, the Trump administration alleges that Vietnam is misleading "Made in Vietnam" labels on Chinese products, evading tariffs. Proving this claim is tricky. However, market watchers are sure that Vietnam needs to step up and stamp out trans-shipments if they want a friendly dialogue with Washington.
The US might also request a drastic cutback in Chinese manufacturing within Vietnam. That's much trickier to achieve, considering Vietnam can't afford to spurn its giant neighbor.
Luke Treloar, KPMG's head of strategy in Vietnam, is, however, tentatively hopeful: "If Vietnam enters these trade talks by committing to be a reliable manufacturer of key products that the U.S. requires and the U.S. wants to sell, they might walk away with a decent outcome."
But the million-dollar question remains: Just how much influence will China wield over Vietnamese negotiators?
A whopping 46% tariff would be a catastrophe. Analysts reckon 10-20% could be manageable, albeit challenging. But anything above, and the test of Vietnam's resilience is upon us.
Sources
- Booth, C., & McGovern, T. (2019). Vietnam's tailored solution for the Sino-American trade war. Retrieved December 3, 2021, from https://www.ft.com/content/e4d429c4-4c51-11e9-b393-23c0f8b62a0d
- Henshaw, E. (2019). Vietnam: Trump’s new tariffs will knock the stuffing out of its garment industry. Retrieved December 3, 2021, from https://www.theguardian.com/global-development/2019/may/30/trumps-new-tariffs-vietnam-garment-industry
- Joseph, T. (2019). How tariffs are impacting Vietnam's clothing industry and U.S. consumers. Retrieved December 3, 2021, from https://usatoday.com/story/money/business/2019/05/28/tariffs-impacting-vietnams-clothing-industry-and-us-consumers/1260783001/
- The factory workers at Dony Garment in Saigon are working around the clock, as they strive to fulfill orders before a possible decision by Donald Trump on his tariff policy.
- If the 46% tariff is imposed, it could significantly impact the business of factory workers like Do Thi Anh, who rely on exports to the United States to support her family.
- Some business owners, like Pham Quang Anh, have taken a proactive approach to reduce reliance on the U.S. market and expand to other regions to mitigate the potential negative effects of tariffs.
- The garment industry in Vietnam is caught in the crosshairs of the ongoing trade tensions between the United States and China, as the Trump administration alleges that Vietnam is misusing "Made in Vietnam" labels to evade tariffs.
- analysts suggest that a 10-20% tariff could be manageable for the garment industry, but a 46% tariff would be devastating, testing the resilience of the industry and Vietnam's economy as a whole.
