Vietnamese steel at risk of being eliminated when Mr. Trump increases taxes

Last weekend, the US Secretary of Commerce (DOC) announced that President Donald Trump will consider and decide to apply measures to restrict steel and aluminum imports from a number of countries, including Vietnam, for "national security" reasons. This decision will be made before April 11.

"Vietnamese businesses exporting color-coated steel products to the US will be most affected," a steel industry expert commented.

Vietnamese steel under pressure if the US increases import taxes.

According to the proposal made by the US Department of Commerce, Vietnam is among 12 countries that will be subject to the highest tax rate of 53%, the remaining countries will be subject to 24%. "This tax rate is too high for steel products, mainly galvanized steel, exported by Vietnamese enterprises to the US. Vietnamese steel will have difficulty surviving and face the risk of being eliminated from the US market," said Mr. Nguyen Van Sua - Vice President of the Vietnam Steel Association (VSA).

Mr. Nguyen Van Sua said that the DOC's proposal to the US President to apply Article 232 is "dangerous and complicated". The Vice President of VSA analyzed that there is no clear regulation.g and specifically quantify "what is the impact on national security", so this technical barrier is erected entirely subjectively to protect US domestic goods.

On the other hand, the tax rate that Vietnam could be imposed at up to 53% will put Vietnamese steel exported to this market at risk of being eliminated compared to competitors because it cannot compete on price.

"The technical barriers that the US is erecting on steel and aluminum products to protect domestic production are violating international commitments and World Trade Organization (WTO) regulations. In case the conciliation solutions are not achieved, we can consider suing the WTO," Mr. Sua shared.

The US market was only "opened" by Vietnamese steel enterprises a few years ago and the export output is not much. VSA data shows that,In 2017, Vietnamese steel exports to other countries reached 4.7 million tons, an increase of 28% compared to 2016. To the US market, the export volume only reached 567,000 tons, down nearly half compared to 2016 due to the country's steel industry protection policies.

The US is a new export market for Vietnamese steel, according to Mr. Nguyen Van Sua, a very potential market because it is the world's largest importer of this product. Therefore, any policy change will have a certain impact on businesses.

However, a recent analysis by Rong Viet Securities Company offers a more optimistic perspective, stating that the impact on Vietnamese steel from this defense measure is not too negative.

Two pioneering enterprises in exporting steel products to the US since 2016, Hoa Sen and Nam Kim, both said,Due to the unprofitable order size, shipping costs and delivery times, exports to the US are only for market research and to help boost sales. In addition,The US market is not the target of most businesses strong in exporting galvanized steel, because export activities in the ASEAN region are still vibrant.

In 2017, the steel industry exported 2.4 million tons to the ASEAN market, accounting for nearly 69% of total steel exports. Exports to the US stopped at 470,000 tons, accounting for less than 11% of total exports.

"When domestic demand and the ASEAN bloc still provide positive growth potential, not exporting to the US will not cause difficulties for Vietnamese businesses," said a report by Rong Viet Securities Company.

On the contrary, if the US imposes an increase in import tax, it will be a driving force to promote Vietnamese steel enterprises.In-depth investment both increases the value of domestic production and improves competitiveness in the integrated market.

Just as investors expressed concern about the possibility of President Trump's government imposing import tariffs on Vietnamese steel, Hoa Phat said it had received an order to export 15,000 tons of steel to the US on the first day of operation after the Tet holiday.

A representative of the Trade Defense Department (Ministry of Industry and Trade) said that because Vietnamese steel and aluminum account for an insignificant proportion of the total import turnover of goods imported into the US, the Ministry of Industry and Trade requested the Government of this country to carefully consider applying the above import restriction measures. This is also to ensure compliance with WTO regulations and international practices, and not to affect the developing trade relations between the two countries.

"The Ministry of Industry and Trade will continue to closely monitor the developments of the case and is considering all options to ensure legitimate rights for Vietnamese businesses," said a representative of the Trade Defense Department.