Asian risk managers must take US-China trade war seriously as impact deepens

The real-world effects of the ongoing trade war between the US and China are beginning to be felt in Asia, as corporations and governments work out how to react to the new tariffs and the risks they present. Nikkei Asian Review reported, for example, that the Vietnamese government has started to take steps to clamp down on shipments of products from China and elsewhere that pass through Vietnam and are relabelled as Vietnamese to avoid US tariffs. The news service also reported that China is working hard to keep foreign enterprises in the country and offering benefits so that the advantages of staying outweigh the heavy tariffs imposed by the US. Nikkei Asian Review reported that one year into the trade war with the US, more than 50 global companies, including Apple and Nintendo, have announced, or are considering plans, to move production out of China. Chinese manufacturers are also reportedly considering their options, including makers of personal computers, smartphones and other electronics. The Vietnamese crackdown follows a series of reports by local newspaper Tuoi Tre, which revealed that Vietnamese-made televisions by home electronics maker Asanzo were almost entirely made from Chinese imports. The newspaper reported that one of the most important tasks of the workers in the Vietnam plant was to remove 'made in China' from a sticker placed on every LCD panel imported from China. It reported that after being assembled through a simple six-step process, the televisions were sold as having been made in Vietnam with Japanese technology. Other products, such as ovens, were imported in finished form. This comes as Vietnam benefits from an influx of manufacturing companies that have decided to shift production out of China because of the trade war. Vietnam's goods surplus with the US leapt more than 40% year on year, to $21.6bn for the five months through May. It is thought that the Vietnam government’s new rules will clarify requirements for a product to be considered domestically made, such as the percentage of the content of each product that was sourced from Vietnam and how much of the assembly process was handled there. US President Donald Trump suggested last month that Vietnam could face tariffs if it did not tackle the rerouting problem. He called the country "almost the single worst abuser" on trade. The problem facing the Chinese authorities as they attempt to stem the effects of the trade war was made clear by a statement given by an executive of Sharp to Nikkei Asia Review. "We need permanent measures to avoid the risk of tariffs and be eligible for US government procurement," said Kiyofumi Kakudo, CEO of PC maker Dynabook. Apparently, the company is planning to relocate production of its US-bound notebook PCs to a new plant being built in Vietnam. Such PCs account for 10% of the unit's total notebook production. Apple has called on major suppliers to consider moving 15% to 30% of iPhone production out of the country. Nikkei Asian Review reported that Apple is about to start trial production of its popular AirPods wireless earbuds in Vietnam. Trials such as these are usually precursors to mass production, reported Nikkei Asian Review. American PC makers HP and Dell are also reportedly considering moving up to 30% of their notebook production from China to southeast Asia and elsewhere. Japan's Nintendo will also shift a portion of its Nintendo Switch game system production from China to Vietnam, claimed the news service. It is thought that this difficult situation is one of the reasons why China has recently announced that it would ease restrictions on foreign investment in seven fields, including oil and gas, and is also working to bring forward plans for opening up the financial sector. This is just not a war of words between politicians; the statistics are already showing the impact on trade. In the first five months of the year, exports from China to the US fell 12% year on year in value terms. Those from India, Vietnam and Taiwan showed double-digit gains.

Asian risk managers must take US-China trade war seriously as impact deepens

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