Exports from Vietnam to the United States have grown significantly since America’s trade war with China began in 2018. At the same time, Vietnam has been importing more Chinese goods. This has led many to question: is “Made in Vietnam” really “Made in China”?
Not as much as the public would think, say Ebehi Iyoha and Jaya Wen, assistant professors at Harvard Business School. By one broad measure of products, about 16 percent of US exports from Vietnam—or $15.5 billion—were estimated to be rerouted Chinese products in 2021. But that is not entirely accurate, the researchers found.
Trade “microdata” from firms’ transactions suggests that a significant portion of the imported Chinese goods added value to Vietnam’s economy through new investments that resulted in jobs and increased production. These products weren’t merely relabeled in Vietnam to evade tariffs—the true definition of rerouting, according to their recent working paper “Exports in Disguise: Trade Rerouting during the US-China Trade War?”
The added value of imports only becomes clear by looking at trade data at the company level. On that basis, just 1.8 percent, or $1.7 billion, of goods were likely to have been rerouted in 2021.
Wen and Iyoha coauthored the paper with Duke University Professor Edmund J. Malesky; Sung-Ju Wu, a research fellow at the University of Nottingham in the UK; and Bo Feng, a predoctoral fellow at HBS.
Magnets for rerouting companies
Iyoha, who long observed politically charged trade disputes involving rice imports in her native Nigeria, found wide variation in rerouting across products in Vietnam. Based on company data, these goods are most likely to be rerouted.
Chinese-owned rerouters gain ground
The researchers found that rerouting increased along with the growth of companies sending their products to Americans from Vietnam. Chinese-owned firms that rerouted their goods through Vietnam gained competitive advantage.
Why should the US care about Vietnam’s economy? At a time when tensions between the US and China are high, American policymakers might need strong trade allies in the region. Moreover, Iyoha notes, with a population of 100 million, a nearly 99 percent literacy rate, and an annual GDP growth rate exceeding 6 percent, Vietnam is poised to become an increasingly important player in the global economy and a significant economic partner for the US.
Punitive measures “could have negative consequences for the Vietnamese economy, undermining the strengthening relationship between Vietnam and the United States,” the authors write.
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Image credit: HBSWK, with assets from AdobeStock/moofushi and AdobeStock/natrot
