Vietnam has benefited the most from the trade war with China during Donald Trump’s first term as president. But Hanoi could be down on its luck, business groups and analysts warn, if the president-elect follows through on threats of blanket tariffs when he returns to the White House.
Vietnam has run the fourth-largest trade surplus with the United States in recent years – behind China, Mexico and the European Union – as global manufacturers moved factories away from China to avoid the impact of Trump’s tariffs. is
But the success of this “China plus one” has put Vietnam in a vulnerable position. Its economy has become heavily dependent on the United States, which accounts for about 30 percent of all Vietnamese exports.
“Vietnam may now face tougher scrutiny, especially for goods transiting through Vietnam to circumvent tariffs on China,” said Marco Ferster, ASEAN director at Dizan Shira & Associates in Ho Chi Minh City. for”.
Trump has vowed to impose tariffs of up to 60 percent on imports from China and 20 percent on goods from all other countries. Economists at Singapore bank OCBC have warned that Vietnam’s economic growth – which was 5 percent last year – could fall by as much as 4 percentage points under such measures.
“If tariffs are imposed on Vietnam, the effects could be devastating,” said Froster.
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Although Trump did not mention Vietnam during the recent presidential campaign, in 2019 he described the country as “almost the only one that mistreats everybody.”
“Vietnam takes advantage of us worse than China,” he told Fox Business.
Businesses have already come to a standstill. “Some Korean businesses in Vietnam are concerned about possible tariffs from the Trump administration,” said Hong Sun, head of the Korea Chamber of Business in Vietnam. South Korea has long been one of Vietnam’s top sources of foreign direct investment, and electronics group Samsung is the single largest investor in the country.
South Korean companies could delay or reduce investment and production in the country if Washington were to impose tariffs on Vietnamese goods, Hong said.
Vietnamese officials are well aware of the potential dangers of Trump’s trade hostility. Vietnamese President Luong Quang issued a thinly veiled warning at the Asia-Pacific Economic Cooperation summit in Peru last week that “isolationism, protectionist policies and trade wars only lead to economic recession, conflict and poverty”.
“Now, more than ever, it is important to move beyond the ‘zero-sum game’ mentality and avoid nationalistic policy decisions,” he said.
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While Southeast Asia as a whole has benefited from the US-China trade war, no country has been as successful as Vietnam in attracting investment thanks to China’s proximity, business-friendly policies and incentives.
Foreign investment reached $36.6 billion last year, while Vietnam’s trade surplus with the United States rose to $104 billion after Trump took office, nearly tripling its $38 billion level in 2017. It was more. Thailand ranks second in the region, with a US trade surplus of about $41 billion.
US-Vietnam relations have strengthened since Trump left office. The two countries last year upgraded their relationship to a “comprehensive strategic partnership”, the highest level of diplomatic ties provided by Hanoi. President Joe Biden called Vietnam “a major power in the world and a bellwether in this important region,” and dismissed Trump’s label of “currency manipulator.”
Washington has also supported efforts to boost semiconductor production in Vietnam, as part of its drive to limit China’s access to advanced chipmaking.
Experts said Vietnam could increase scrutiny of Chinese investments or launch anti-dumping investigations to appease Trump or reduce its trade surplus by buying military equipment, civilian aircraft or liquefied natural gas from US companies. can take steps to
“The broader challenge is that Vietnam’s relatively small economy has only so much capacity to increase imports from the US,” said Peter Mumford, head of Southeast Asia at Eurasia Group.
“On the FDI front, Hanoi may modestly boost investment in the US, but it will help ease Washington’s trade concerns.”
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Vietnam has developed friendly relations with both the United States and China under its non-aligned foreign policy known as “bamboo diplomacy”. But with any increase in purchases from the US, Vietnam has to be careful to avoid angering China, its largest trading partner and neighbor.
Investment from China has also increased – alongside wider FDI – by 80% in 2023. China accounts for the most new projects in Vietnam this year.
Förster noted that many Chinese goods were being sent through Vietnam “to avoid tariffs, sometimes under questionable rules of origin or even under fake ‘Made in Vietnam’ labels”.
Hanoi is working to establish stricter standards for product labeling, a move that could help avoid the wrath of the incoming US administration, he said.
Investments by Chinese companies may face additional scrutiny from Hanoi, but Vietnam will still attract more FDI as manufacturers move from China, said Thuy Anh Nguyen, director of Vietnam-focused asset manager Dragon Capital. Keep happening.
He added that Hanoi “is likely to actively adjust import and export practices, negotiate trade agreements, and strengthen compliance with original laws to reduce tariff risks”. added.
Additional reporting by Haohsiang Ko in Hong Kong
