U.S. Imports From Vietnam Soar as Chinese Factories Simply Move Countries

President Donald Trump (centre L) and his Vietnamese counterpart Nguyen Phu Trong (centre R) witness a signing ceremony between President and CEO of VietJet aviation join stock company Nguyen Thi Phuong Thao (R) LUONG THAI LINH/AFP/Getty Image

U.S. imports from Vietnam grew sharply in the first quarter of 2019 as businesses shifted their supply chains amid continued trade tensions between Beijing and Washington.

American imports from Vietnam rose 40.2 percent in the first three months of 2019, compared to the previous year, and could overtake the U.K., which was the 7th largest supplier of U.S. imports in 2018, according to Bloomberg. Imports from South Korea also rose 18.4 percent this year.

Imports from China, however, declined 13.9 percent.

In 2018, Vietnam's largest export to the United States was electrical machinery. The U.S. imported $11 billion worth, plus $7.2 billion of knit apparel and $6.2 billion of footwear, according to the Office of the United States Trade Representative.

President Donald Trump and Vietnamese counterpart Nguyen Phu Trong, center right, witness a signing ceremony at the Presidential Palace in Hanoi on February 27. LUONG THAI LINH/AFP/Getty Images

Amid rising trade tensions between Beijing and Washington, the Trump administration has said that tariffs will force companies producing in China to relocate factories to nearby countries.

"My expectation is a lot of this business will be moved from China to other places in the region," Treasury Secretary Steven Mnuchin said while speaking before the House Financial Services Committee on Wednesday.

And that appears to be what's happening. News reports have noted anecdotal evidence of the shift, with business owners and analysts saying they've seen the relocation of companies' manufacturing facilities to Vietnam.

Zhejiang Hailide New Material, which makes industrial yarns, told investors last year it would set up a factory in Vietnam to avoid tariff hikes. Hl Corp, which makes bike parts, also said last year that it was moving production to Vietnam in hopes of evading tariffs. And GoerTek, a producer of Apple's AirPods, also plans to move production to Vietnam.

The situation likely hasn't been helped by the most recent escalations between China and the U.S. At the end of February, the president agreed to delay a tariff increase on $200 billion of Chinese imports as the two countries continued efforts to settle their trade dispute.

But the reprieve didn't last long. Days before a delegation of Chinese officials were scheduled to arrive in Washington for talks earlier in May, President Trump tweeted that he was increasing tariffs from 10 percent to 25 percent on $200 billion of imports from China. China retaliated by saying it would raise tariffs as high as 25 percent on $60 billion of goods it imported from the U.S.

Trump has since furth ramped up the trade dispute by targeting Chinese companies, including telecommunications company Huawei, which it added to a blacklist.

Since the tariff hike, analysts have warned that the trade war could lead to dangerous outcomes for the global economy. JP Morgan Chase CEO Jamie Dimon cautioned on Tuesday that the ongoing tensions could impact corporate confidence and inhibit investment.

"Trade has gone from being a skirmish to being far more important than that. If this goes south in a bad way, and you have other surprises, that could be part of the thing that changes confidence, changes people willing to invest," Dimon said during a conference.

"You're already starting to see businesses starting to think about moving their supply lines and stuff like that," he continued. "That can obviously slow down business investment and cause uncertainty of all different types."