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U.S. Purchases From Vietnam On The Rise

Vietnam’s exports to the United States were 35% higher in the first nine months of 2019 compared to the first nine months in 2018. At the same time, trade expert Michael Ryan explains, various “factors are lengthening the delivery cycle to consumers” from Vietnam. This means U.S. residents are buying much more stuff from Vietnam, and it is taking longer for it to arrive.

Americans are buying more from Vietnam because of the tariffs that Trump has placed on China. When it comes to cheaply manufacturing simple products, Vietnam has many of the same advantages as China. There’s plenty of cheap labor, and there are plenty of ports on the Pacific.

So when U.S. importers face taxes for importing from China, they turn instead to Vietnam. For importers and their customers, this flexibility is very beneficial. It mitigates the upward price pressure that Trump’s tariffs impose. That means China bears the cost of losing the business, and Americans see smaller price hikes on the goods being imported — for example, electronics.

While some sectors of U.S. manufacturing have thrived under Trump, the past 15 months of the trade war have been a very mixed bag for U.S. factories. Manufacturing output has been lower this fall than last fall, for instance. Factory orders are also down for the year.

One inefficiency is that Vietnam does not have supply chains or manufacturing capacity or even a workforce set up to handle the influx of orders diverted from China. Surely, these things are now ramping up, but investors will be cautious before making capital expenditures because the flood of orders from the U.S. is due to a temporary tariff that Trump could lift in an instant.

source: Washington Examiner