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`Made in Vietnam' Export Boom Defies Trump's Trade Threats

`Made in Vietnam' Export Boom Defies Trump's Trade Threats

(Bloomberg) -- From mobile phones to furniture, Vietnam’s export boom shows no signs of losing steam, defying a gloomy outlook at the beginning of the year when U.S. President Donald Trump persisted with his trade threats.

Furniture maker Xuan Hoa Viet Nam Co. is planning for a 20 percent increase in export orders next year by investing $3 million on equipment to expand production, General Director Le Duy Anh said in an interview. The company, based near Hanoi, makes office tables and cabinets for clients including Ikea.

“I’m quite optimistic about our sales next year,” Anh said. “We have new customers in Europe while our regular clients also sent more orders than last year.”

When Trump pulled the U.S. out of the Trans-Pacific Partnership in January, it was seen as a blow to Vietnam, which exports about a fifth of its goods to the world’s largest economy. Instead, a global trade recovery and Vietnam’s young and low-cost workforce have been magnets for international investors like Nestle SA, which have opened factories in the country this year. That’s helping underpin its economy, which expanded 6.81 percent this year, among the fastest in the world.

Coming of Age

“We’ve seen Vietnam’s coming of age this decade with its rapid transformation to a manufacturing powerhouse,” said Eugenia Victorino, an economist at Australia & New Zealand Banking Group in Singapore. “The diversification of products and markets provides a tailwind to exports. We are very bullish on growth, though we remain cautious of structural issues of legacy bad debts.”

`Made in Vietnam' Export Boom Defies Trump's Trade Threats

Gross domestic product rose 7.65 percent in the fourth quarter from a year earlier, data on Wednesday showed. Exports increased 21 percent in 2017 to a record $214 billion, with mobile phones and parts making up the biggest segment at about a fifth.

Click to read: Vietnam End-4Q GDP +6.8% Y/y; By Industry

The strength of the U.S. economy bodes well for Vietnam, which was the top exporter of goods last year among Southeast Asian nations. Sales to the U.S. rose 8 percent this year.

Nguyen Sy Hoe, deputy general director of Phu Tai Corp., which makes home furniture for Wal-Mart Stores Inc. outlets in the U.S., forecasts a 30 percent increase in exports next year. Phu Tai, based in a central province of Vietnam, relies on the U.S. for 40 percent of its sales.

Vietnam’s shipments abroad accounted for 90 percent of GDP in 2015, compared with 64 percent a decade ago, according to the World Bank.

Xuan Hoa is buying three machines that make wooden furniture parts and equipment to make steel cabinets, Anh said. The company is also boosting its workforce by 20 percent with the hiring of 100 more laborers.

“We’ve increased production and are now preparing for the first shipment next quarter,” Anh said. “We’re very prepared.”

Vietnam’s government is counting on those shipments to bolster growth to as much as 6.7 percent in 2018, the same goal for this year.

“There are some potential risks for next year that we need to be mindful of,” said economist Vu Minh Khuong, Associate Professor at National University of Singapore, who is also a member of the newly-formed economic advisory team to Vietnamese Prime Minister Nguyen Xuan Phuc. “Downside factors may come from the U.S. and some other international markets. But for now, the economy is resilient with good indicators.”

--With assistance from John Boudreau

To contact the reporter on this story: Nguyen Dieu Tu Uyen in Hanoi at uyen1@bloomberg.net.

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Karl Lester M. Yap

©2017 Bloomberg L.P.