State by State: Vietnam and Michigan Trade

By Andrew Salzman and Charles Small, Dezan Shira & Associates

At US$451.52 billion in GDP in 2014, and a population of 9.88 million recorded in 2010, Michigan is a northern powerhouse of the United States. When comparing this to Vietnam’s over 90 million-strong population and US$171.42 billion GDP in 2014, the disparity between the two economies presents opportunities for complimentarity.

In terms of trade, the relationship is still developing, and it is doing so at pace. In 2014, Michigan imported US$205 million of Vietnamese goods and services, up 42.3 percent from 2013 and brought Vietnam into 24th place as a source for Michigan’s imports. In return, Michigan exported US$90 million in merchandise to Vietnam, up from only US$26 million in 2013, which ranked Vietnam 34th as a destination for Michigan’s merchandise exports. The top five merchandise exports from Michigan to Vietnam are food manufactures, machinery, transportation equipment, chemicals, and computer and other electronic products.

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When the Trans-Pacific Partnership negotiations are finalized, Michigan may benefit from the reduction in Vietnam’s import tariff on plastic products, which was up to 20 percent in 2012. As the U.S. is Vietnam’s top destination for clothing and other textiles, an important rate to consider for exporting to Michigan are those on man made fiber overcoats, which faced a 28 percent tariff in 2013. Plastic-based sneakers faced a 16.7 percent tariff on imports to Michigan in 2013.

Michigan, the location of the headquarters of both Ford and General Motors (GM) is the most important U.S. state in the global auto industry. As Vietnam’s auto industry is expected to have the fastest growth in Southeast Asia over the coming decades, those involved in Michigan’s auto industry, if not involved in Vietnam already, should be examining the market with a keen eye. GM saw the benefits early and has been operating in Vietnam since 1993.

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Vietnam’s relationship with Michigan-based companies has not always been so positive – Dow manufactured both Agent Orange and napalm used by U.S. forces in Vietnam close to half a century ago. A lawsuit filed in 2004 by the Vietnam Association for Victims of Agent Orange (VAVA) against Dow in the U.S. was dismissed in 2005, and a petition to refile the case was denied by the Supreme Court in 2009. A little goodwill could go a long way for brands with a negative history in Vietnam.

Links between Michigan and Vietnam are more than just economic – Vietnamese is one of the top ten non-English languages spoken in Michigan. 16,787 Vietnamese residents of Michigan were recorded in the 2010 U.S. Census, up 23 percent from a decade previously.

Today, Vietnam boasts a youthful population, with a median age of 29.2. 24.3 percent of the country are aged 0-14, and 17.8 percent aged 15-24. Vietnam will become a more significant market for Michigan products over time as its economy continues to grow. For now, firms should focus on how Vietnam’s young and low-cost population can integrate into Michigan companies’ global supply chains.

Import and Export: A Guide to Trade in Vietnam
In this issue of Vietnam Briefing Magazine, we provide you with a clear understanding of the current business trends related to trade in Vietnam, as well as explaining how to set up your trading business in the country. We also attempt to give perspective on what will be Vietnam’s place in the Association of Southeast Asian Nations (ASEAN) in 2015, and look at some of the country’s key import and export regulations.

Using Vietnam’s Free Trade & Double Tax Agreements
In this issue of Vietnam Briefing we explore how Vietnam’s Free Trade Agreements – and especially those via its membership in ASEAN – will affect foreign investment into Vietnam. We also go a step further and examine the specific, bilateral Double Tax Agreements that Vietnam has enacted, and how these can be further used to minimize profits and withholding taxes that would otherwise be levied upon foreign investors.

Developing Your Sourcing Strategy for Vietnam In this issue of Vietnam Briefing Magazine, we outline the various sourcing models available for foreign investors – representative offices, service companies and trading companies – and discuss how to decide which structure best suits the sourcing needs of your business.

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