How many Mexicans are there in China
The real winners of the US-China trade dispute
Dung Trans' business is booming: "Last year we added a second floor to our factory. And right now I'm looking at a new location that is four times the size of the current one." For his company, Spartronics, which makes electronic products on behalf of other companies, the ongoing trade dispute between China and the United States is a blessing. And he's not alone in that.
The United States and China have been involved in a trade dispute for more than two years. Between July 2018 and September 2019, the US increased tariffs on almost all imports from China to up to 25 percent.
These punitive tariffs are already having a profound effect. Before the dispute began, 23 percent of all US imports were from China - more than $ 526 billion in 2017 alone, and about as much as neighboring Canada and Mexico combined. At the end of 2019 it was only 18 percent - a decrease of more than $ 26 billion.
"The two biggest losers in the conflict are the US and China itself," said Yasuyuki Sawada, chief economist at the Asian Development Bank (ADB). A 2020 analysis by the bank concludes that gross domestic product (GDP) and employment in both countries are suffering from the conflict.
Imports from China fell during the conflict
For US consumers, the dispute means they will have to pay higher prices for Chinese products. In China, it has primarily led to a decline in exports, as a UN analysis in November 2019 showed.
For example, US companies purchased significantly fewer cell phones, computers and furniture from China at the end of 2019 than at the end of 2017, i.e. before the trade war.
2020: a ceasefire and a pandemic
In January 2020, the US and China signed an initial agreement designed to de-escalate the conflict. The deal requires China to buy billions in additional US products to reduce its trade surplus with the US. The condition was considered unrealistic even before the agreement entered into force.
The pandemic only exacerbated that. "The requirement to import additional US products now seems very demanding because the growth of the Chinese economy will be much lower than was predicted in January," says Yasuyuki Sawada. In addition, the tariffs previously imposed remain in force; the agreement only brought a break, not a solution to the conflict.
The pandemic then largely brought global supply chains to a standstill. But China's economy has been able to recover since the second quarter of 2020. After the lockdown, it was one of the first countries to supply economies like the US with the products they needed.
"That was partly due to rising exports of healthcare goods and equipment," says Sawada. Imports of face masks from China to the USA have increased more than tenfold.
The many customs exemptions that the USA has granted in recent months for surgical gloves and face masks, but also for electronic items, auto parts and other products, have also contributed to this. All of this has brought US-China trade almost back to what it was before the dispute began.
But the effects of the trade war are still being felt. While the prices for imports from China rose in the USA, the demand for cell phones, computers, lamps and printers did not decrease. US consumers and manufacturers therefore switched to other countries.
Southeast Asia and Mexico benefited from the trade dispute
"The profit seems to be greatest for those countries that can manufacture similar products to China," says Sawada.
The US neighbor Mexico was one of the beneficiaries: Between 2017 and 2019, the country exported an estimated 4.7 billion dollars more to the US as a result of the trade dispute.
Even more important are the additional billions for countries like Vietnam, Malaysia or Taiwan, which have a lower gross domestic product than Mexico.
Vietnam is the clear winner here: the $ 6.4 billion the country gained in US exports during the two years of conflict is almost double its total annual health expenditure.
This is the result of a DW analysis that examined exports to the USA between 2017 and 2019. An indication of the importance of a country is also the market share of its exports in certain sectors of the target country USA.
For example: before the conflict, 62 percent of all computers imported by the US came from China. At the end of 2019 it was only 44 percent. For China, that equates to a lost sales value of more than five billion US dollars.
But China's loss was Taiwan's and Mexico's gain: They each gained around six percentage points in market share. At the end of 2019, they accounted for 10 and 25 percent, respectively, of the computers imported from the USA.
However, the pandemic has undone the gains Mexico has made over the past two years. Mexico's exports to the US have collapsed; today the country sells fewer goods to the US than it did before the trade dispute began.
In contrast, the Southeast Asian economies have so far been able to maintain their profits. Vietnam and Taiwan have even further increased their exports to the USA.
This is partly because countries like Vietnam positioned themselves as an alternative to China with foreign manufacturers even before the trade dispute began, also because wages in China are now relatively high. Samsung from South Korea, for example, the world's largest manufacturer of cell phones, closed its last cell phone factory in China in 2019 and is increasingly producing in Vietnam.
"Vietnam has gradually increased production, attracted foreign investors and increased exports to the US," says Khiem Vu, manager for Vietnam at Global Resources, a company that connects companies with suppliers in Asia.
The trade conflict has accelerated the decision of multinational corporations to move their production from China to other countries, he says. "Many have forced their current Chinese manufacturers to relocate their production to Vietnam. Chinese manufacturers of crocs (foam shoes), for example, have built factories with several thousand workers in Phu Tho that only serve the US market."
Electronics from Vietnam are in demand
Crocs isn't the only shoe manufacturer taking this step; Vietnam exported around 30 percent more shoes to the US at the end of 2019 than two years earlier, while China's shoe exports fell by 15 percent over the same period. "For labor-intensive products such as bags, suitcases, glasses, clothing, furniture, technology and electronics, Vietnamese suppliers are now more competitive than ever because of the tariffs on Chinese products," says Khiem Vu.
Even more than shoes or suitcases, it is electronic items - like the ones that Spartronics makes - as well as cell phones and computers that have seen the greatest boom. Vietnam exported more than twice as many cell phones to the US at the end of 2019 as it did two years earlier.
For Spartronics, the pandemic has even accelerated growth. "We're lucky to be in the right place at the right time," says Dung Tran. Part of its business is making medical products such as ventilators and COVID-19 tests. "This part of the company is growing incredibly. It more than makes up for the difficulties in other segments."
All of this has brought about visible changes in Vietnam, says Dung Tran: "I used to live in Silicon Valley, California. What we see today in Vietnam reminds me of the dot-com boom back then. If you've been to Vietnam before and are returning now , you will see more buildings, more skyscrapers. "
The question is how quickly the country can expand its infrastructure to keep up with growth, he says. "Suddenly there is traffic jam at ports and airports because of the sheer volume of goods delivered. The government is trying to make improvements, but it will take time."
Back to free trade
Dung Tran is confident that the changes he is seeing in his company and across Vietnam will continue. "Southeast Asia and Vietnam will continue to grow despite the trade conflicts."
Nevertheless, he wants the trade dispute to come to an end: "We cannot live without China. We have to be able to rely on each other in a fair way. That is very important."
The trade dispute between the heavyweights USA and China, as this analysis also shows, is having an impact on many other countries. "Today, iPads, iPhones and other devices are manufactured through very complicated, closely interlinked supply chains," explains Yasuyuki Sawada. "If Chinese companies produce less, this also affects suppliers in other Asian countries and has negative effects there."
Sawada also hopes that the trade dispute will end. "The Asia-Pacific region has benefited greatly from free trade over the past few decades. If at all possible, we should return to it."
Christine Laskowski contributed to the reporting.
The data, code and methodology behind this analysis can be found in this Github repository.
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