The US vs China Trade War Impact on Vietnam’s Economy
Tesis, Magíster en Economía, IE-PUC, 2020
Abstract: At a time when the trade war between the United States and China is slowing down the world economy, Vietnam continues to show real dynamism with a growth rate of +6.96% in 2019, compared to +6.81% in 2017 and +7.08% in 2018(Reference: International Institute of Finance, IIF). Indeed, there-routing of products to circumvent customs duties on Chinese exports and low production costs may counter balance the negative impact of a diminishing global demand.This phenomenon has aroused the interest of many economists
who seek to identify the country that benefits most from the trade conflict. Although, disagreements remain. In this regard, my project aims at evaluating the extent to which the US-China dispute affects the economy of Vietnam. The solving method is carried out in
twosteps. The first step is an absolute analysis that compares Vietnam’s economic growth to what it would have been in the absence of a trade war. Using Ordinary Least Square (OLS) estimations I assess Vietnam’s economic growth between 2000 and 2019, and then
model its economic performance during the same period assuming that the trade war did not happen. The exercise is replicated with Vietnam’s imports from China and exports to the US, but findings remain unclear. The second step, which consists on a relative analysis,
compares Vietnam’s economic performance to that of the South-East Asian region. For this purpose, an OLS estimation of each country’s economic growth relative to that of the region is applied to a binary treatment variable. Combined with a mean t-test, findings
reveal a significant positive effect on Vietnam’s dynamism after the outbreak of the conflict, whilst its neighboring countries are marginally or negatively affected. Please note that data cover the period 2000-2019 for Phase 1 and 2015-2019 for Phase 2,before the effects of the Covid-19 pandemic were considered.