Federal Reserve Board note finds Chinese-owned firms drove a growing share of Vietnam's exports to the U.S., rising to 25 percent

The Federal Reserve Board published a FEDS Note examining Vietnam's export surge to the United States after the 2018-19 U.S.-China tariff increases. Using Vietnamese firm-level ownership data matched with transaction-level trade data, the note finds that Chinese direct investment in Vietnam rose sharply after the tariffs and that Chinese-owned firms accounted for a disproportionate share of Vietnam's subsequent export growth to the U.S. The analysis concludes that part of the trade diversion toward Vietnam reflected the relocation of production, especially by Chinese firms, rather than a clean break from China-centered supply chains. The note highlights three main findings. First, Chinese greenfield foreign direct investment into Vietnam accelerated after the tariffs, and the number of Chinese-owned firms in Vietnam more than doubled to 2,864 in 2023 from 1,287 in 2018, increasing their share of foreign-owned firms to 15 percent from 9 percent. Second, Chinese-owned firms' share of Vietnam's exports to the U.S. rose to 25 percent in 2020-2023 from 11 percent in 2018-2019, while domestic Vietnamese firms' share fell to 23 percent from 33 percent and other foreign-invested firms' share edged down to 52 percent from 56 percent. Third, newly established foreign-invested firms, both Chinese and non-Chinese, were more reliant on the U.S. market and on imports from China than longer-established firms, which the note interprets as evidence consistent with production moving to Vietnam while intermediate input sourcing remained closely tied to China. The note says these patterns imply that bilateral trade data can overstate how far U.S. tariffs reduced dependence on China, because firms were able to shift production geographically while preserving supply-chain links to Chinese suppliers.