Southeast Asia gains from US-China trade tussle
The region is capitalising on a rush of new orders and production moves
No one wins from a trade war is a standard refrain among economists. Southeast Asian businesses are trying to prove that maxim wrong.
The region is capitalising on a rush of new orders and production moves as firms reconsider their business in the US and China amid a deepening trade war. About one-third of more than 430 American companies in China have or are considering moving production sites abroad amid the tensions, according to survey results released on September 13 by AmCham China and AmCham Shanghai. Southeast Asia was their top destination.
Vietnamese furniture producer Phu Tai is among those looking to cash in. The maker of home furnishings for Wal-Mart Stores outlets in the US is planning for a 30 per cent increase in its exports this year and in 2019, according to Deputy General Director Nguyen Sy Hoe. It’ll invest about $10 million to expand two factories at its base in Binh Dinh province and to upgrade production lines in two other factories in Dong Nai further south.
“We see this as a great chance to boost our exports to the US as we’re getting more orders from that market,” Hoe said by phone on September 4. “Given the escalating trade war between the China and the US, many American importers are switching to buy from the Vietnam.”
The 10-economy bloc of the Association of Southeast Asian Nations, or Asean, is a natural magnet for new factories thanks to low production costs and well-trodden manufacturing plants, solid growth with the five biggest economies expanding at about 5.3 per cent on average, and improving ease-of-doing-business rankings — not to mention geographical proximity to China.
Hong Kong’s Trade Development Council recognises Southeast Asia’s clout. Nicholas Kwan, research director of the territory’s statutory body that supports local firms, called Southeast Asia “an economic powerhouse” and pointed Hong Kong businesses to the bursting region as a safe haven amid trade-war tensions in a press conference on Tuesday.
Producer sentiment indicators around the world have shown negative impact from the tariffs on $50 billion in goods the US and China have imposed on each other since July.
With another $200 billion in Chinese imports targeted and China announcing retaliatory tariffs against $60 billion of US goods, trade-reliant Southeast Asia will also be exposed to that overall drag. But unlike many developed economies, the alternative production bases also stand to gain as companies shift orders to them to avoid levies.
Nguyen Thanh Phuong, chief executive officer of Kangaroo Group, a Vietnamese producer of home appliances, forecast a 10 per cent increase in sales to the US in the second half of 2018. His company has received orders from American clients who used to buy from Chinese makers, Phuong said in a Tuesday interview in Hanoi.