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U.S. Import Focus Asiaization, Vietnam's Manufacturing Industry Ushers New Opportunities
Feb 02,2024
The U.S. container import share data shows that the proportion of imports from China and other countries has not changed much, which is consistent with the three major procurement trends generally recognized by the business and geopolitical circles: the "China Plus ONE" strategy, the "friend business" strategy (I. e., choosing suppliers with friendly relations with China) marginal revenue in terms of quantity and dependence on Vietnam and India are beginning to show.
Retailers and other businesses in the United States are trying to reduce trade with China to seek lower-cost labor and avoid reliance on a single origin for key goods and items. The trend is not sudden, as the share of U.S. imports from China has been steadily declining since 2018, although at one point in 2021, retailers are re-embracing their familiar partners.
While America's allies may see little gain from the "friendly business" policy, the share of American imports from South Korea, Japan and Germany increased last year-South Korea is the biggest beneficiary of this policy, with its share of all U.S. trading partners rising the most, from 4.1 percent in 2018 to 4.7 percent in 2019.
The decline in German manufacturing made it the worst-performing Western economy last year, but Germany and its exporters can still take some comfort from modest access to the U.S. market-its share of imports in the U.S. rose from 3.9 percent in 2018 to 4.1 percent in 2019. At the same time, Japan's share of U.S. imports also rose, from 2.3 percent to 2.5 percent.
Although China's share has declined, Vietnam, the second largest source of US container freight, has not changed its share of US imports between 2018 and 2019. With the share of U.S. imports from Vietnam remaining at 8.7 percent, Vietnam is arguably the biggest beneficiary of the U.S. shift from China to a choice of lower-cost manufacturing.
Although the data of just one year does not represent a trend, they provide evidence for those who believe that Vietnam's production strength is close to its peak. Compared with other manufacturing alternatives to China, including India, Vietnam's growth is more stable and strong-in fact, compared with only 3.3 percent in 2013, Vietnam's current data has more than doubled.
The data show that India has long been an alternative to China's supply chain, and its potential is slowly unfolding. Last year, the share of U.S. imports from India rose from 3.9 per cent to 4.1 per cent-a slower growth compared to Vietnam, where India's share has grown by just over 3 per cent over the past five years.
Of course, these data do not show that goods may be illegally transferred from China to the United States through other countries; they do not reflect the situation of Chinese factories providing raw materials for production lines in other countries (usually owned by China); nor do they show how much manufacturing has been transferred from China to Mexico, and goods produced in Mexico are then shipped north for American consumers and businesses.
Figure: Total Container Imports (TEU) and Year-on-Year Changes in the United States
Regardless of the change in supply, annual container imports reflect the decline in U.S. demand following the global epidemic, which explains why expectations for future inbound container growth in 2024 are conservative. Total U.S. imports fell 12.9 percent in 2023, to about 24.2 million TEUs; in the two years before that, U.S. imports had reached near-record highs of 28 million TEUs; and in the five years before the epidemic triggered a market boom, U.S. imports grew at a compound annual growth rate of just 4.5 percent.
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