Netgear, TP-Link at risk as Vietnam finally becomes a target for Trump

China 2658 Cons. Discr. - Durables 364 Info Tech - Comms Equip 178 Info Tech - Tech Hardware 635 Tariffs 1670 U.S. 4725 Vietnam 296

The administration of President Donald Trump will reportedly soon launch a section 301 review of Vietnam’s currency practices, Bloomberg reports. That’s connected in large part to accusations of currency manipulation that have helped a surge in exports to the U.S. in the past three years. While an outcome is unlikely to be delivered before the elections it will nonetheless generate uncertainty for supply chains relying on the region.

One potential hurdle is that the U.S. Treasury Department only has Vietnam on its “monitoring list” for currency manipulation rather than having fully deemed it to be a manipulator. A counterpoint there is that President Trump previously, unilaterally declared China to be a manipulator and the Treasury report is behind schedule.

The move shouldn’t be a surprise and has been in the offing for over a year, as discussed in Panjiva’s research of October 2019. The Trump administration’s focus on the trade deficit as a measure of fairness, or otherwise, of relations has made that almost inevitable. Furthermore, the Commerce Department already included the currency concept in an investigation of car tire imports from Vietnam.

Panjiva’s data shows that the U.S. trade-in-goods deficit with Vietnam reached $58.3 billion in the 12 months to July 31 compared to $32.3 billion in 2016. That’s been the result of a 14.9% annualized increase in imports from Vietnam which in turn has largely been due manufacturers shifting capacity there and away from China as a result of the U.S.-China trade war.

Vietnamese exports to U.S. surge after China tariffs, COVID-19

Chart segments U.S. merchandise trade with Vietnam by direction.   Source: Panjiva

The section 301 review could apply tariffs to industries that have grown the fastest. Panjiva’s analysis shows that the largest contributors to the expansion in U.S. imports from Vietnam included: a 26.6% annual growth surge in mobile phone and network devices, the dollar value of which accounted for 25.4% of the growth alone; a 54.2% CAGR in shipments of solar panels; a 21.7% rise in shipments of furniture; and a 274% jump in shipments of video and arcade game systems.

Furniture, phones and routers lead Vietnam’s export surge

Chart segments U.S. imports from Vietnam by product.   Source: Panjiva

The Trump administration has previously shown an unwillingness to apply tariffs to mobile phone and videogame imports in the confines of the section 301 duties applied to imports from China and so may be excluded this time around too. That’s certainly not been the case for furniture or network devices while solar panels have also been subject to section 201 safeguarding duties as well.

Major importers from Vietnam may look to accelerate imports in order to build stockpiles against the risk of tariffs being implemented in an expedited manner by the Trump administration.

Among the importers of network devices Panjiva’s U.S. seaborne import data shows imports linked to Netgear have surged by 70.9% year over year in July and August combined, while those linked to TP-Link jumped 181% over the same period. Some have been in decline, however, potentially reflecting depressed demand in the wake of COVID-19 with shipments linked to CommScope down by 7.2% year over year in the past two months.

TP-Link powers up shipments from Vietnam

Chart segments U.S. seaborne imports of network devices from Vietnam by shipper.   Source: Panjiva

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