As Vietnam moves up the rankings of most prosperous countries, we’re getting more of a sense of exactly where the nation of 97 million will fit in the global economy.
Already, it’s clear that Vietnam is becoming a key manufacturing base for consumer products destined for Europe and the U.S., and an important part of pan-Asian supply chains, according to an analysis by Trade Data Monitor, the world’s premier source of trade statistics, which has been building up its Vietnam database.
The top markets for Vietnam are the U.S., China, and European Union. In 2021, exports to the U.S increased 24.9% to $96.3 billion. Exports to China rose 14.5% to $56 billion, and shipments to the EU rose 12.7% to $40.6 billions. Within the EU, Vietnam’s top trading partners were Germany and the Netherlands.
The U.S. market is being driven by U.S. residents buying consumer goods. Shipments of textiles and garments to the U.S. increased 15% to $16.1 billion in 2021, while exports of computers and computer parts rose 22.9% to $12.8 billion. Exports of machines, equipment, tools and instruments rose 45.9% to $17.8 billion. Shipments of footwear rose 17.8% to $7.4 billion.
In China, however, trade data show that Vietnam is as much a supplier of parts as a pure manufacturing source. And some of those supply chains are changing. The dominant category was telephones. Exports increased 23% to $15.2 billion, but exports of computers and computer parts were basically flat, rising 0.1% to $11.1 billion. And exports of textiles fell 1.8% to $1.3 billion. Exports of rubber rose 24.9% to $2.3 billion. Obviously, Western companies are hoping that Vietnam becomes a consumer society able to purchase Western goods, but so far its biggest supplier is still China, partly because the countries are joining up to form parts of the same supply chains.
Imports from China rose 30.5% to $109.9 billion. By comparison, imports from the EU rose 15.5% to $17.3 billion, and imports from the U.S. rose 11.4% to $15.3 billion. Imports of computers and computer parts from the U.S. rose 1.6% to $4.8 billion. Cotton imports fell 11.4% to $1.2 billion. Imports of machines, equipment and tools from China rose 46.4% to $24.9 billion. Shipments of computers and computer parts rose 18.5% to $21.9 billion. And imports of fabrics increased 24.7% to $9.1 billion. Imports of iron and steel increased to 79.9% to $4.4 billion.
Overall, Vietnam’s gross domestic product is expected to rise 5.5% in 2022, up from 2.6% in 2021, according to the World Bank. The exporting manufacturing sector in 2022 will benefit “from steady demand from the United States, the European Union, and China,” the World Bank wrote.
To be sure, the Covid-19 pandemic has hit Vietnam in the last couple years, after the country was largely successful at curtailing the virus in 2020. Vietnam is a rare country whose total trade is twice that of GDP, without the stimulus of oil or mining resources, and now its trade with regional partners is expected to expand further thanks to the new Regional Comprehensive Economic Partnership. The RCEP, which will cut tariffs and ease trade among countries that already trade with each other, includes Vietnam, China, Japan, South Korea, Australia and New Zealand.
“Encouraging free trade is even more important now that the global economy is in a slump and there are signs of countries turning inward,” Japanese Prime Minister Yoshihide Suga told other leaders, according to a Japanese official quoted in the Wall Street Journal.
Vietnam has been the prime beneficiary of China’s changing trade relationships with the U.S. and Europe, rising protectionism in the West, supply chain adjustments, and the boom in economies across Asia. The combination of low labor costs, stable exchange rates and prodigious foreign investment from multinational companies have turned Vietnam into a shining star.
It’s the versatility of the Vietnamese export machine that makes the country’s future especially bright. Vietnam’s factories make everything from Nike and Adidas shoes to Samsung and Apple phones, as well as wide varieties of furniture and electronics. It’s also been boosting its shipments of heavy industrial goods like iron and steel, according to TDM data.