Evaluation of the Trade Relationship Between Vietnam and China; Vietnam and United States: A Comparison Using Gravity Model

This study aims to evaluate the determinants of trade relationship between two largest trading partners of Vietnam, United States and China. Using gravity model for time series data from 1986 to 2015, the study found that economic growth rate plays a crucial role in stimulating the trade flow. Both trade relationships fit with the practical approach of Heckscher-Ohlin theory, stating that trade flow increases between countries with different income levels. The most important finding of this study lines on the results regarding the impact of trade agreements. While United States-Vietnam bilateral agreement creates trade, the trade agreement between ASEAN and China produced trade diversion. As China expands its markets among ASEAN countries, Vietnam should diversify its export markets to improve its export flow.