There are a few third-party economies which have gained from the trade war by becoming substitute and alternative sources for consumer products, industrial equipment, component parts and microchips.

Example Based Analysis:

Vietnam is considered to be one of the largest beneficiaries of the trade war between the US and China and according to a study conducted by the Nomura Bank of Japan, the biggest beneficiary of the diversion of imports (in the form of additional US imports).

Chinese companies lost significant market share to Vietnam, in the form of companies producing car tires, refrigerators and furniture. Vietnam has been particularly shrewd and capitalised on an opportunity to try and bypass China by boosting production, providing a stable environment for foreign investors and increasing exports to the US. 

Vietnam’s GDP in 2019 remained robust at 7%, the highest in Southeast Asia. It recorded the second strongest first-quarter growth in the past decade, surpassed only by 7.45% in 2018. And their exports to the US jumped by 34.8% year on year in the first nine months of 2019. (Vietnam Briefing, 2020)

Vietnam does face challenges when it comes to sustaining this economic advantage. Ramping up production depends on a focused labour supply. The Vietnamese culture doesn’t look favourably upon working overtime and skill cultivation is lacking.

Vietnam’s present supply chain network, on ground contacts and infrastructural capacity needs to be strengthened and its efficiency enhanced. Sudden, surging demand can put unnecessary pressure and lead to the collapse of an already weak system.

The Vietnamese government must put in concentrated effort to improve the business environment and keep the domestic economy competitive on a global and regional scale.

Conclusion:

While a trade war between two major economies can have a devastating global impact, South-East Asian markets (which were previously overshadowed by the sheer magnitude and the export-driven nature of the Chinese economy) have emerged as winners

The benefits of this trade war is massive for third party smaller economics and can provide a significant boost to their exports, making these countries much more competitive globally (relative to just American and Chinese firms dominating the market). While there is a rapid increase in the number of companies relocating from China, it is essential that policy-making on a government level is strengthened to extend these benefits.

These gains can slip away easily owing to the limited infrastructural capacities of smaller South-East Asian economies which have traditionally lacked the scale to transform into a “mini China”.