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Vietnam’s Niche Export Sectors Highlight Complexity of Global Trade

As global trade putters in 2023, because of weak consumer demand, lingering Covid fallout and protectionist tensions, the slackening has highlighted niche sectors in the global economy where trade is still robust.

The upshot: We’re no longer living in a world where every consumer is buying more stuff and everything is made in China, or Vietnam. Instead, it’s a world of specific supply chains and business relationships constantly in flux.

That signals opportunity for those who can spot it, but that demands on a careful reading of economic trends– and trade statistics.

There are emerging exceptions, notable agriculture and automobiles, where global trade demand appears extraordinarily resilient for the moment.  Global trade in cars and trucks, especially electric vehicles, has been booming, thanks in part to massive investment and production in China, and the war in Ukraine has helped propel furious agricultural buying and stockpiling around the world.

For Vietnam, the dampening of consumer demand in the U.S. and Europe has been especially damaging. Overall exports fell 11.9% in the first six months of 2023, dropping to $164.7 billion from $187 billion. That’s part of a trend that’s prompted the World Trade Organization to reduce its forecast for global trade growth to 1.7% in 2023, down from 2.7% in 2022.

However, within Vietnam’s decline, there are specific sectors worth highlighting where growth has been strong, underlining the growing complexity of global trade.

Although its export economy has struggled this year, Vietnam remains a key regional manufacturing hub still favored by thousands of U.S., European and Chinese firms.

Sectors or countries where trade has been increasing suggest corporate and entrepreneurial initiative, and strong underlying demand at the shop door.

Exports of paper and paper products, for example, rose 11.1% to $1.1 billion. Exports of fruits and vegetables, for example, increased 60.1% to $2.7 billion in the first half of 2023. Other agricultural products did well, too. Exports of rice leapt 32.2% to $2.3 billion.

China, which has cut industrial production and purchases of commodities like copper and iron ore, has been the most important buyer of food and agriculture. Shipments of rice to China from Vietnam rose 71.2% to $390.6 million. Vietnamese exports of fruits and vegetables to China more than doubled, rising 121.8% to $1.8 billion.

Meanwhile, Vietnam’s exports of cell phones, garments and other consumer staples, sectors which had underpinned previous waves of economic growth, all fell.

That’s why, overall, Vietnamese exports to China fell 0.7% to $25.9 billion. Imports declined 19.1% to $49.6 billion, as Vietnam’s factories bought fewer raw materials they need for industrial production.

Vietnam’s trade with its biggest partners all declined this year. Vietnamese exports to the U.S. fell 22.1% to $44.4 billion and imports dropped 9% to $6.9 billion. Exports to the EU declined 11% to $21.5 billion and imports shrank 8.9% to $7.4 billion.

But the small, niche trading relationships aren’t just for products. They’re also for countries. Vietnamese exports to Ireland, for example, increased 16.6% to $238.2 million. Exports to Brazil increased 14.8% to 1.3 billion, and those to Saudi Arabia rose 68.1% to $509.4 million. Shipments to Indonesia increased 7.6% to $2.5 billion.

These niche supply chains and trading relationships, along with breakthrough growth in its service sectors, have helped Vietnam weather the storm.

In the second quarter, Vietnam’s GDP increased 4.1% compared to a year before, compared to 3.3% in the first quarter of 2023. With global demand faltering, Vietnam’s central bank has played a more activist role, slashing interest rates four times this year. In addition, the government has cut the nation’s value added tax.