From Trade War to Job Growth: Vietnam’s Unintended Economic Transformation

The study highlights how Vietnam benefited from the 2018-2019 US-China trade tensions, experiencing a surge in exports to the US and creating significant job opportunities, particularly for women, in key manufacturing industries. However, sustaining these gains amid global economic fragmentation remains a challenge.

The study "Trade Policy and Jobs in Vietnam: The Unintended Consequences of US-China Trade Tensions," spearheaded by researchers Lorenzo Rotunno, Sanchari Roy, Anri Sakakibara, and Pierre-Louis Vezina, under the aegis of the International Monetary Fund (IMF) and universities like King’s College London and the University of Exeter, highlights Vietnam's remarkable economic transformation during the 2018-2019 US-China tariff war. Using the tariffs imposed by the US on Chinese imports as a natural experiment, the study demonstrates how Vietnam became a primary beneficiary of redirected trade flows, boosting its export profile and creating new jobs, particularly for women. The research is a comprehensive exploration of how global trade tensions have shaped Vietnam’s economic trajectory, offering insights into trade policy, labor markets, and gender dynamics.

Export Opportunities Fuel Economic Growth

The 2018-2019 trade war between the US and China saw tariffs imposed on two-thirds of Chinese exports, targeting products worth $250 billion. This move inadvertently created significant opportunities for other nations, with Vietnam emerging as a leading alternative supplier for the US market. Vietnam's export growth was particularly striking, not just in terms of increased volumes but also through the introduction of new product lines. The shift was driven by Vietnam's proximity to China, its established manufacturing capabilities, and its integration into global value chains. The study found that Vietnamese exports to the US of tariff-affected products surged significantly, reinforcing the country’s role in global manufacturing. This trend highlights a broader shift in production networks, with emerging economies like Vietnam benefiting as the world’s manufacturing hub tilts away from China.

Jobs Surge, Especially for Women

Vietnam’s export growth translated directly into job creation, with firms most exposed to the tariff hikes seeing a 5% increase in employment. Notably, this growth was largely driven by female workers, with treated firms creating 8% more jobs for women than their less-affected counterparts. This gender-specific impact reflects structural patterns within Vietnam's labor market, where women are often employed in labor-intensive, export-oriented sectors such as textiles and electronics. The study highlights how trade policies can disproportionately benefit certain demographic groups, offering opportunities for female empowerment in developing economies. However, it also underscores the vulnerabilities faced by women in the labor force, including lower wages, higher underemployment rates, and limited access to higher-paying roles.

Industrial Transformation and Value Addition

The industries that saw the greatest growth in employment included machinery, electronics, and textiles sectors heavily affected by the US tariffs on Chinese products. This industrial transformation was not merely a rerouting of Chinese exports through Vietnam but represented genuine value addition and increased domestic production. Evidence showed a rise in Vietnam's domestic value-added content in its exports to the US, reinforcing its position as a manufacturing hub. The study emphasizes that Vietnam’s success lies not only in absorbing displaced trade flows but also in deepening its integration into global supply chains. This shift also attracted increased foreign direct investment (FDI), further strengthening Vietnam’s industrial base and economic resilience.

A Cautionary Outlook for Sustained Growth

While the short-term benefits of the US-China trade tensions for Vietnam are evident, the study warns of long-term uncertainties. Persistent geopolitical tensions and the deepening of global economic fragmentation could pose challenges for countries like Vietnam. Such fragmentation risks disrupting global value chains and reducing trade and welfare gains for emerging economies. The authors argue that Vietnam must adopt proactive measures to sustain its growth. This includes fostering industrial competitiveness, enhancing workforce skills, addressing gender disparities in the labor market, and promoting domestic innovation. Vietnam’s government has also been vigilant in monitoring trade practices to ensure compliance with international norms, preventing the misuse of its market as a conduit for circumventing US tariffs.

The Road Ahead for Vietnam

This research contributes to critical discussions on trade policy and labor markets in developing economies. It highlights Vietnam's unique position as a beneficiary of global trade realignments, particularly in the context of the US-China trade war. The findings align with broader evidence that countries like Vietnam, Malaysia, and Thailand have reaped significant benefits from trade diversion. By focusing on gendered outcomes, the study offers valuable insights for policymakers aiming to foster inclusive economic growth. While Vietnam’s export boom and job creation mark a milestone in its economic development, they also highlight the challenges of sustaining these gains in an increasingly fragmented global economy.

The study portrays Vietnam as a rising star in global trade, capitalizing on opportunities created by geopolitical tensions. The surge in exports and the accompanying employment growth, especially for women, underscore Vietnam’s potential as a manufacturing powerhouse. However, the findings also serve as a cautionary reminder of the vulnerabilities that accompany rapid economic growth, particularly in a volatile global trade environment. Policymakers must address these challenges to ensure Vietnam’s continued success as a leader in global trade and a beacon of inclusive development.