The Effect of the US-China Trade War on Vietnam: The Birth of a New Asian Tiger?

Abstract

The US-China trade war affected not only the two direct participants, but also third-parties that participated in supply chains with one of those countries or that stood ready to serve as an alternative source of supply. In this thesis, I study the impact of the trade war on Vietnam, a rapidly growing economy in Southeast Asia. I use a difference-in-difference methodology to compare quantities and unit values (prices) of Vietnamese exports to the United States for products that saw jumps in US tariffs on Chinese goods with those that did not. My method also allows me to study the dynamics of these impacts over a ten-month period following any tariff hike. I find that the US-imposed tariffs triggered an almost immediate increase in the unit value of competing Vietnamese exports and significantly expanded the volume of such exports after a lag of about six months. In order to determine if Vietnam also benefitted from the trade war by expanding sales to other markets, I analyze the effects of the US-imposed tariffs on the quantity and unit value of treated Vietnamese exports to the rest of the world. My findings reveal little or no such effect.