US Duties on Vietnam Steel: Investors Bullish Despite Trump’s Trade Threat
The US Department of Commerce (USDOC) announced duties of more than 400 percent on steel imports from Vietnam, surprising many observers, and prompting concerns among foreign investors about the potential for more tariffs in the future.
Vietnam, thought to be the main beneficiary of the US – China trade war, has recently attracted increased scrutiny from the US. In the most recent ruling, the USDOC stated that certain products produced in South Korea and Taiwan were being sent to Vietnam for minor processing, before being shipped to the US as corrosion-resistant steel products and cold-rolled steel.
Tariffs are now set to as high as 456 percent on Vietnam steel imports using material from South Korea and Taiwan.
How the US and Vietnam got here
Vietnam’s trade surplus with the US has grown to US$600 million, according to a Bank of America Merrill Lynch study. In the first five months of the year, the surplus was already 43 percent higher than the previous year. It is this surplus that the US seems to be targeting.
The US in May 2018 imposed duties on Vietnamese steel products that originated in China. Earlier in December 2017, the US imposed duties on steel products specifically on Vietnam that originated from China as they evaded anti-dumping rules.
Authorities in Vietnam have stated that the country is working to reduce the trade surplus by buying Boeing jets and energy products as well as cracking down on Chinese manufacturers who reroute goods to bypass tariffs.
However, US President Donald Trump said in a recent interview that Vietnam was “almost the single worst abuser of everybody,” prompting further concerns from investors if more tariffs were in order.
But what do the tariffs really mean, and does it really threaten Vietnam as an investment destination?
While the US accounted for 15 percent of Vietnam’s steel exports, with steady increases recently, steel accounts for less than two percent of Vietnam’s total exports.
It is also important to note that steel produced from materials locally or any other country is exempt from duties. Representatives of the domestic steel industry said that while the imposition of tariffs is not good news, it will have minimal impact on the industry.
In response, Vietnam’s Ministry of Industry and Trade has urged local companies to refrain from buying steel products from Taiwan or South Korea to avoid duties.
Cambodia accounts for the highest portion of Vietnam’s steel exports, while Indonesia and Malaysia also receive a significant amount. Vietnam could look to ramp up exports to these countries to offset the US imposed duties as an alternative.