The General Statistics Office (GSO) reported that in the first four months of 2023, Vietnam’s export and import turnover with the US declined 22.1 and 11.9 per cent on-year, respectively – both due to economic difficulties and the US’ technical barriers. Total trade hit $32.5 billion.

More favourable conditions have been created to boost exports of high-tech products and more, photo Le Toan

However, the grey situation has changed to brighter colours in the first four months of this year, when total bilateral trade reached $38.6 billion, including $34.1 billion worth of Vietnam’s exports – up 19.1 per cent on-year, and $4.5 billion of US’ exports – up 4.6 per cent on-year.

Key Vietnamese exports included high-tech products like consumer electronics and smartphones, along with garments and footwear.

According to the GSO, such a major rebound in trade reflects a rosier landscape, fuelled by the comprehensive strategic partnership forged last September in Hanoi during US President Joe Biden’s historic state visit to Vietnam.

“To further sharpen the partnership, both nations need to increase exchanges in visits at all levels, boost political trust – especially respect for the two nations’ political regime; and continue to consider expand investment and trade as a big focus, while intensifying bilateral ties in science and technology, and innovation including a semiconductor ecosystem,” stated Vietnamese Minister of Foreign Affairs Bui Thanh Son.

Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi (AmCham), told VIR that the US and Vietnam becoming comprehensive strategic partners have and will provide both nations with new trade and investment opportunities.

“Vietnam has become one of America’s fastest growing trading partners and we expect this positive trend to continue,” he said. “The US is Vietnam’s second-largest trading partner, its largest export market, and one of the top drivers of investment here. Vietnam has risen to become a top-10 trading partner of the US and the economic relationship between the two countries is expected to continue its rapid growth.”

Two-way trade between Vietnam and the US soared from $450 million in 1995 to $110.6 billion last year.

Strong propellants

One of the reasons behind a rise in bilateral trade, especially Vietnamese exports to the US, is that the US has provided more favourable conditions for Vietnamese products.

For example, after a thorough investigation, the US Department of Commerce (DoC) last November concluded that steel pipe products imported from Vietnam did not evade the anti-dumping and countervailing duties that the US applies to similar goods from Taiwan.

One month earlier, stemming from the US’ imposition of anti-dumping duties on South Korean stainless steel round wire products, the DoC also concluded that Vietnam’s stainless steel wire did not evade anti-dumping duty in the US.

More than a week ago, it also issued a notice terminating the investigation into the product scope of steel wheels imported from Vietnam. The probe was initiated in August 2023 into the product scope of steel traction wheels imported from the Vietnamese market.

The petitioner, Dexstar Company of the US, had submitted a request to the DoC to launch a scope review investigation on steel wheels completed in Vietnam from components originating in China.

Based on the information and documents collected during the investigation process, the DoC unveiled its intention to end the investigation of the case on March 15 as Vietnamese enterprises did not import any wheel components from China to produce wheels as alleged by the plaintiff.

In 2023, Vietnam exported 1.08 million tonnes of assorted steel products to the US, up 58.8 per cent, earning $852 million, up 1.2 per cent on-year.

Last November, the US Department of the Treasury continued not to list Vietnam as a currency manipulator in its latest semi-annual report on the macroeconomic and foreign exchange policies of major trading partners of the US.

In the joint statement on the elevation of bilateral relations last September, the US appreciated Vietnam’s efforts to further modernise and enhance the transparency of its monetary policy and exchange rate management framework, to promote macroeconomic stability and to ensure the safety and soundness of the banking system.

Awaiting a bigger driver

At present, the US is considering the recognition of Vietnam as a market economy. This would align with President Biden’s goal to make the Southeast Asian manufacturing hub a ‘friend-shoring’ destination for the US.

Last September, Vietnam filed an official request that the DoC consider it a market economy, citing the country’s economic reforms made in recent years. If the status upgrade is accepted, it will mean an end to high tax (anti-dumping and countervailing duty) on Vietnamese imports in the US. The DoC will complete their review in late July.

“In any case, if Washington DC decides to change Vietnam’s non-market economy (NME) status to a market economy label, there will be significant implications for trade relations and broader geopolitical dynamics in the Asia-Pacific region,” said Asia Briefing, a subsidiary of consultancy firm Dezan Shira & Associates.

The US has considered Vietnam an NME since 2002. Per US law, an NME is defined as any foreign country that the DoC determines does not adhere to market principles regarding cost or prices, leading to the sale of goods within that country failing to reflect their fair value.

At present, according to Asia Briefing, the US assesses the value of a product intended for import from an NME like Vietnam by referencing a third country – a market economy such as Bangladesh. It uses the perceived product value in Bangladesh as a benchmark. Consequently, this benchmark is presumed to represent the production cost for a Vietnamese company, without consideration for the company’s actual cost data.

This calculation causes the dumping margin to be pushed up substantially and does not actually reflect the situation of Vietnamese companies.

Luan Nguyen, Cargill Vietnam country president, told VIR, “Cargill has long advocated for the recognition of Vietnam as a market economy, especially given its implications for key industries like aquaculture. Vietnam’s classification as an NME has resulted in significant anti-dumping taxes on species such as pangasius and shrimp, adversely affecting their competitiveness in vital markets like the US,” Nguyen said.

According to Nguyen, recognition as a market economy would alleviate these burdens, facilitating access to the US market.

“This regulatory shift would not only reduce trade barriers but also strengthen bilateral relations between the US and Vietnam,” Nguyen said. “Market economy recognition would stimulate production and services in industries where Vietnam holds export strength, including agricultural products. This, in turn, fosters greater economic collaboration between the nations.”

Nguyen Hoai Nam, deputy general secretary of the Vietnam Association of Seafood Exporters and Producers, also commented that if the US recognises Vietnam as having a market economy, future anti-dumping lawsuits initiated by the US will be subject to market economy rules, meaning that the US will no longer use a third country as a replacement value.

“It is hoped there will be more advantages for Vietnamese exports to the US,” Nam said.

In 2023, Vietnam’s shrimp exports to the US are estimated to hit $682.5 million, down 15.4 per cent on-year, while exports of tuna and tra fish hit $326.6 million and $271 million, down 32.9 and 49.6 per cent on-year, respectively.

In Q1 2024, the US imported nearly 182,800 tonnes of Vietnam’s shrimp products worth $1.4 billion.

According to Vietnam’s Ministry of Planning and Investment, cumulatively as of April 20, the US was Vietnam’s 11th largest foreign investor with total registered capital of over $11.9 billion for over 1,350 valid projects.

“Vietnam is increasing its attractiveness as a destination for American investment as many companies seek to diversify their global supply chains,” said Sitkoff from AmCham.