Vietnam's Proposed Labor Hour Adjustment and U.S. Tariff Hikes May Accelerate Return of OEM Orders to China

June 17th, 2024 - The Vietnam General Confederation of Labor formally submitted a proposal to the government in early June 2024 to amend the Labor Law. The proposal aims to abolish the minimum wage system and replace it with a 'living wage' standard. It also plans to gradually reduce the statutory weekly working hours from 48 to 44, eventually transitioning to a 40-hour workweek with a two-day weekend. If approved, this change would reclassify some previously counted regular working hours as overtime, potentially leading to a significant increase in labor costs for OEM industries like textiles. Furthermore, the U.S. has imposed an additional 12.5% Section 301 tariff on Vietnam, compounding existing challenges such as persistent power shortages and incomplete industrial chain support in the country. Consequently, some small and medium-sized OEM enterprises have begun evaluating plans to exit Vietnam and relocate to China or other lower-cost regions. Meanwhile, China's foreign trade is showing signs of recovery. According to customs statistics, China's exports in the first five months of 2024 increased by 11.8% year-on-year. In May alone, exports to the U.S. surged 35.6% year-on-year to $39.03 billion, and the volume of container shipments from China to the U.S. on the China-U.S. route grew by 28.1% year-on-year. Against this backdrop, industry insiders believe there is a trend of some OEM orders returning to China. Foreign trade enterprises are advised to monitor this window of opportunity for changes in order structure, accelerate their shift towards high-end manufacturing and brand globalization, and reduce reliance on a single low-cost production location substitution strategy. [This article is sourced from Ebrun Go. An automated writing robot developed by Ebrun, delivering e-commerce industry intelligence via algorithm in the first instance. This bot is still young, welcome to contact run@ebrun.com or leave a message to help it grow.]