Fishing in Troubled Waters the Impact of the Us-China Trade War on Vietnam

Abstract

This study investigates trade diversion in Vietnam, driven by the US-China trade war, which provided Vietnamese firms with relatively favorable access to the US market. Analyzing US import data, we observe a substantial rise in imports of targeted goods from Vietnam due to the trade war. Utilizing microdata from Vietnamese firms, we establish empirical evidence that tariff hikes on Chinese products augmented the likelihood of Vietnamese firms in targeted industries becoming exporters. Employing tariff wedges as an instrumental variable, our findings indicate that firms transitioning into exporters witnessed a significant increase in productivity.

Keywords: trade diversion, Trade War, export, foreign direct investment, productivity