Growing US and European political pressure over Chinese steel exports has put Vietnam at the centre of a dispute that could widen tensions over international trade as well as regional security.

Both Washington and Brussels have launched high-profile probes into alleged shipments of Chinese metals through Vietnam to avoid tariffs in western countries. 

The unwelcome attention could threaten the access Vietnam’s exports enjoy in western markets. It could also bring Hanoi into conflict with Beijing, at a time when Vietnam’s leaders have been improving defence co-operation with the US as a counterweight to China. 

Both the US and the EU want to clamp down on metal shipments by Chinese exporters whose prices undercut domestic companies. Western aluminium businesses have alleged that Chinese production is passing through Vietnam for remelting and onward shipment to the US. 

Olaf, the EU’s anti-fraud agency, said it was investigating the alleged transshipment by Chinese companies of steel through Vietnam to disguise its origins and avoid European duties. It declined to give further details, except to say that it was co-operating with relevant Vietnamese authorities. 

Vietnam has publicly confirmed it is co-operating with the EU probe, according to media reports. The government did not respond to a request for comment. 

Exports of steel from Vietnam to the US have surged more than tenfold so far in 2016, while Chinese exports to Vietnam have also risen. The US Department of Commerce is investigating whether Chinese trading companies have exported cold-rolled steel, an intermediate product, to Vietnam for further processing and export. A second Washington probe is looking at the international market in corrosion-resistant steel. 

Similar allegations have dogged Chinese aluminium processors, particularly China Zhongwang Holdings, as a glut of the metal has driven down international prices. Western competitors accuse China Zhongwang of transhipping through Vietnam to avoid tariffs in the US and to collect export rebates in China. China has massive excess aluminium capacity because abundant hydropower and coal have cut the cost of the energy needed to produce the metal. 

Zhongwang said last week that it took US trade laws seriously and had already stopped making the products in question almost two years ago. The company announced in August that Liu Zhongtian, its founder, would buy Aleris, a privately held US rolled aluminium products maker, for $2.33bn including debt. 

China accounts for about half the world’s production of both steel and aluminium. While its metals exports cause political resentment in the US and Europe, its demand for ore to feed its mills and smelters helps buoy profits for mining companies based in the US, UK, Brazil and Australia. 

The western investigations put Vietnam in a tricky position as it seeks to push back against Beijing in territorial conflicts, while avoiding angering its giant neighbour or inflaming anti-Chinese sentiment at home.

The long-running dispute over the Paracel Islands in the South China Sea triggered anti-Chinese riots in 2014. Protesters torched and ransacked foreign companies in the country’s industrial zones, including many from Taiwan and mainland China.

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