The Impact of US - China Trade War on Vietnam

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In FY2022, we performed an extensive literature review and conducted a comprehensive data analysis. We learned the literature on trade diversion and firms’ entry into the export market. Then, we investigated the evidence of trade diversion in Vietnam, driven by the US-China trade war, which allowed Vietnamese firms to gain relatively favorable access to the US market. Using the US import data, we showed that the trade war significantly increased the import of targeted products from Vietnam. We further explored firms’ responses using microdata and demonstrated that those affected by the US-China trade war are more likely to be an exporter and receive FDI (Foreign Direct Investment). Using tariff wedges as an instrumental variable, we also found that firms that became an exporter experienced a considerable increase in productivity.