Vietnamese firms are not benefiting from the US-China trade war as perceived. A recent report by financial data provider Fiin Group shows foreign-invested firms account for almost all the rise in exports to the US as its trade spat intensifies. South Korean garment manufacturers in Vietnam have reaped the highest benefits from the trade war.

Between June 2018 and June 2019, 143 South Korean companies accounted for almost half of Vietnam’s garment export value. In garments, Vietnamese firms only accounted for 16 per cent of the export value during the period, with FDI firms making up the remaining 84 per cent.

The advantage for South Korean corporations stems from the fact that they have been in Vietnam since the early 2000s and have well established supply chains in the country. “The majority of Vietnamese companies is still small-sized and does not meet foreign buyers’ requirements on quality, quantity and cost,” says the report.

US buyers still prefer products from China because prices are more competitive than that of Vietnamese products. The Fiin Group report said an American buyer has to pay $55 for a reflective clothing item produced by a Vietnamese firm, while the same product from a Chinese company costs half at $27.

The reason is that Vietnamese companies have to import most of the raw materials, such as fabric and reflective material, from China. Even with tariffs added, Chinese companies can still provide products at lower prices than Vietnamese companies, the report added.