Vietnam Could Be a Winner in US-China Trade War, Asian Development Bank Economists Say

The trade conflict between the U.S. and China could benefit Vietnam, Malaysia, Taiwan and Thailand if purchasers shift to those countries should the conflict drag on or get worse, according to a recent paper by economists working at the Asian Development Bank.

They said that so far, the negative effects of tariffs levied on washing machines, solar panels, steel and aluminum, and on a broad section of Chinese goods, have been small for other Asian economies outside China. But if half of trade is redirected to other countries because of the U.S.-China trade war -- the economists said that's a conservative estimate -- the rest of Asia will benefit. Vietnam's economy could grow 2.1 percent faster than if the trade war had never begun; Malaysia and Taiwan could gain 0.4 percentage points in GDP, and Thailand could gain 0.2 points of GDP, "because they produce and export goods that compete with products from economies affected by the tariffs." They estimate that if all Chinese imports face tariffs in the U.S., Vietnamese exports could grow by more than 7 percent in the near term.

The paper notes there is uncertainty on how much purchases could shift. "The trade redirection effect will take longer the lengthier and more complex the global value chains are, and the ensuing interruption to production could be more protracted," they wrote.

The scale of the tariffs so far are expected to lower China's GDP by 0.5 percent and the U.S. GDP by 0.1 percent, they estimate, assuming the 10 percent tariffs on $200 billion in Chinese imports escalates to 25 percent, as is promised for early March 2019. They said Chinese exports will decline by 3.6 percent, and U.S. exports will decline nearly 2 percent. If all Chinese goods face tariffs, that impact would double for both countries, they estimate.