–Nironjan Roy–

Trump’s officially assuming power is still three weeks away, but national tariff war has already started. After Canadian Prime Minister Justin Trudeau’s meeting with Donald Trump, a high-level delegation is going to meet with Trump’s team to discuss tariff issues.

European countries are seriously thinking about how to respond to Trump’s trade action. Many manufacturers are seriously considering relocation of their production base so that the supply chain can be kept uninterrupted. Some developing countries where manufacturers were previously relocated from China are also concerned about their future export growth

Vietnam is one such country. It reaped huge benefits during Donald Trump’s first tenure when the trade war started with China, because they made a good position in the US market for their export. This country became an attractive place for Chinese manufacturers to establish a production base from where goods were exported to the USA in an apparent attempt to evade US measures applied against Chinese exports. Even many such exports were tariff free which applied to Vietnam.

Trump’s trade war with China in his first term had created good opportunities for many countries of emerging markets and Vietnam was one of very few such countries, which has well capitalised this opportunity. As reported in US media, since Trump started imposing higher tariffs against Chinese exports in his first term, Vietnam’s economy has expanded around 8% a year with pouring foreign investment and boosting export to the US market.

Many manufacturers have extensively invested in that country to build a production base for exporting to the US market. Since 2016, Vietnam has received almost USD 290 billion foreign investment. South Korea and Japan ranked top among the biggest investors in Vietnam. Singapore is also another big foreign investor, which has invested USD 58 billion during the same period. Even China and Hong Kong have made significant investments in Vietnam in the last ten years.

In this way, Vietnam has become a supplier of a third of the sports shoes, half of the modern beds and dining tables and one fourth of solar cells to the US market. Besides, a substantial quantity of readymade garments is exported from Vietnam to the USA, Canada and other developed countries. Many brand companies in the USA including Apple, Nike and Gap maintain their supply sources which have established manufacturing bases in Vietnam.

However, this opportunity may not continue to exist during Trump’s second term, because the strategy of using Vietnam as a manufacturing base by investors of other countries, particularly China, is now a much-discussed issue and as such known to all including the incoming administration in White House. Since Trump is going to start a new battle over trade, his teams have already indicated that they are determined to seal loopholes of tariff war. This stringent measure will of course impact Vietnam’s export to the USA.

Many Chinese manufacturers have resorted to indirect investment in order to avoid Trump’s tariff targets. These companies have established their subsidiary companies in Hong Kong and Singapore from where investment was channelled to Vietnam. These loopholes are now surfaced and known to US policymakers, particularly Trump’s team. So, Trump’s tariff measure will also target this third-party network and in consequence, Vietnam may lose part of their export business.

Local media has reported that Trump’s nominee for US trade representative, Jamieson Greer, has expressed his determination to tighten the trade rules to prevent what he has described as “third-country workarounds” (in which goods that use Chinese material or were produced in third country by a subsidiary of Chinese company) from entering the US without facing the steep tariffs. Although his warning did not specifically mention any country’s name, yet the message is clear that Vietnam and Mexico are going to be the first target because Chinese exporters have established many manufacturing bases there for exporting to the US market.

The countries with not only Chinese connection but also a wide trade gap with the USA, will be the first target of Trump’s higher tariff. The president-elect Donald Trump has repeatedly expressed his intention to apply a higher tariff on all imports into the USA and mostly focused on the countries which have an adversely large trade gap with the USA.

So, after Trump’s win in the election, the rising prospect of Vietnam’s export has already started fading, because many manufacturers are considering further relocating their production base to other countries fearing higher tariff and other restrictions.

Against this backdrop, export-oriented garment industries in our country are now in great dilemma. They should have positioned themselves well to capture such a relocation opportunity. But, this is not happening because of another changing situation in Bangladesh. Like other business sectors, the garment industry is also facing manifold challenges and adversities such as labour unrest and production disruption etc. for a prolonged period of time.

When there is opportunity for more export growth, Bangladesh’s garment industry is scrambling to survive due to the recent turmoil. If this continues for long, it may have a long-lasting impact on our economy. Therefore, the policymakers, present government and all political parties must extend support and cooperation to the garment owners so that they can survive and continue executing exports and grab new opportunities.