The US-China trade war: What opportunities for Vietnamese seafood?

The US-China trade war is escalating, many Chinese seafood products going to the United States will be imposed higher taxes. This is an opportunity for Vietnamese seafood to expand its market share in this market.

Tuna is one of the items expected to increase exports to the United States. Photo: T.H.

Advantage for exporting shrimp to America

According to the Vietnam Association of Seafood Exporters and Producers (VASEP), the US-China trade war is expected to have a direct impact on the economies of the world, including Vietnam. Vietnamese seafood, including shrimp products, will also be impacted. The US will apply a 10% tax on Chinese shrimp products with HS codes 03061700, 16052105, 16052110, 16052905, 16052910. These are also the strong products of Vietnam in the US market; the US importers will select Vietnamese shrimp in the current context. These products are able to compete on price and tax rates with China in the US market. Therefore, this can be considered as an advantage for Vietnam when increasing exports of these goods to the US. Moreover, Vietnamese shrimp has a certain position with US consumers, so when the supply from China drops, US importers will choose Vietnam as an alternative supply.

However, VASEP stated that due to the high tax on exports to the US, China will also have to reduce the imports of raw shrimp for processing and re-export. This may affect the export of Vietnamese raw shrimp to the Chinese market. Meanwhile, imports of fresh, live and frozen raw shrimp accounted for 94% of total shrimp exported to China in 2017.

In the context of trade war, both the US and China are suspicious of each other, so they will set more stringent technical barriers to Vietnam when exporting shrimp to both markets. The United States will closely examine the origin of shrimp from Vietnam. VASEP said that it is likely that Chinese shrimp companies will be "thorough" with Vietnamese shrimp products to get origin from Vietnam, as will the US for exported shrimp. However, this is also an opportunity for Vietnamese enterprises to affirm their position, improve the quality and transparency of the origin of products to be able to gain market share from China in the US market.

In the first seven months of 2018, the seafood exports reached 4.78 billion USD, up 8.5% over the same period last year. Of which, shrimp products reached nearly 2 billion USD, up 5.5%; catfish reached 1.2 billion USD, up 19%; Tuna still kept steady growth at 359 million USD in the past seven months, up 11% from the same period last year.

The scarcity of raw materials together with the impact of IUU yellow cards made the export of squid, octopus and other seafood slow down in the first half of this year and continue to decline in July. The total export volume of octopus in 7 months increased 8%, reached 360 million USD, while the export of Bivalve molluscs continued to decrease nearly 10% with 55 million USD.

Improve the quality, affirm the position

Not only shrimp, some Chinese seafood items into the US will also drop sharply due to the tariff barriers. Tuna and catfish are typical items. According to statistics from the International Trade Center (ITC), China is currently the fifth largest tuna supplier of the United States. Meanwhile, the United States is currently the fourth largest tuna supplier to China. In 2017, the US exported nearly 9,000 tons of tuna products to China, worth nearly 18 million USD. The US government has listed more than 6,000 import items from China that they intend to tax in early September. Thus, if there is no objection, from September, the import tax on fresh and frozen tuna from China to the United States will increase. This will facilitate other countries to strengthen the export of fresh and frozen tuna to the US, including Vietnamese enterprises.

However, the US trade war with China - an Asian country has created concern for other countries in the region, which have trade deficits with the US, such as Thailand. Therefore, these countries will be more cautious in promoting tuna exports to the US, especially canned tuna products. And this will be a good opportunity for Vietnam to promote products such as frozen tuna loin, fillets to the US market. On the Chinese side, as Vietnam's export market share in this market is small, the opportunities for Vietnamese tuna businesses from this trade war with Vietnam are not great.

Vietnamese catfish companies are also hoping to gain market share from white-fish (in which the most competitive product is Chinese tilapia) in the US market. According to businesses, when the US-China trade war was sparked it has since escalated, and the US decided to impose a 10% tax on seafood products imported from China. Since then, the sales of Chinese tilapia in the US supermarket systems have decreased by 20-30% compared to the previous time. Taking advantage of this opportunity, many suppliers, including Vietnamese enterprises, have pushed up the export of white-fish to the United States to gain market share.

Experts said that the trade war has been unpredictable and its impact is questionable. Shrimp exporting enterprises should consider this as an opportunity to affirm their own position, including improving the quality of products, enhancing their pro-activeness in trade, and taking advantage of signed FTAs. The enterprises also need to actively update on the list of US and Chinese taxable items, as well as for any occurrences of rising exchange rates between the Dollar and Yuan, so as to be able to respond in a timely manner.