Vietnam was one of many greatest beneficiaries of Donald Trump’s commerce warfare with China throughout his first time period. But Hanoi might grow to be a sufferer of its personal luck, enterprise teams and analysts have warned, if the president-elect follows via on threats of blanket tariffs when he returns to the White House.
Vietnam has racked up the fourth-largest commerce surplus with the United States in recent times – behind China, Mexico and the EU – as world producers have moved factories from China to keep away from the affect of Trump’s tariffs.
But this success put Vietnam in a susceptible place. Its financial system has grow to be closely depending on the United States, which accounts for practically 30% of all Vietnam’s exports.
“Vietnam will doubtless now face harder scrutiny, particularly for items transiting via Vietnam to avoid tariffs on China,” stated Marco Förster, Asean director at Dezan Shira & Associates in Ho Chi Minh City.
Trump has promised to impose tariffs of 60% on imports from China and as much as 20% on items from all different international locations. Economists at Singapore financial institution OCBC warned that Vietnam’s financial development – which was 5% final yr – might lose as much as 4 proportion factors with such measures.
“If tariffs have been to be imposed on Vietnam, the consequences might be catastrophic,” Förster stated.
While Trump didn’t point out Vietnam in the course of the latest presidential election marketing campaign, in 2019 he referred to as the nation “simply in regards to the worst abuser of all of them.”
“Vietnam takes benefit of us even worse than China,” he advised Fox Business.
Businesses are already shaken. “Some Korean companies in Vietnam are apprehensive about potential tariffs from the brand new Trump administration,” stated Hong Sun, president of the Korean Business Chamber in Vietnam. South Korea has lengthy been one in every of Vietnam’s primary sources of overseas direct funding, and electronics group Samsung is the biggest investor within the nation.
If Washington have been to impose tariffs on Vietnamese items, South Korean firms might delay or cut back funding and manufacturing within the nation, Hong stated.
Vietnamese officers are properly attuned to the potential dangers of Trump’s commerce hostility. Vietnam’s President Luong Cuong issued a veiled warning on the Asia-Pacific Economic Cooperation summit in Peru final week that “isolationism, protectionist insurance policies and commerce wars solely result in financial recession, battle and poverty.”
“Now greater than ever, it’s vital that we transcend the ‘zero-sum recreation’ mentality and guard in opposition to nationalism that distorts political choices,” he stated.
While Southeast Asia as a complete has benefited from the commerce warfare between the United States and China, no nation has been as profitable as Vietnam in attracting funding as a result of its proximity to China and business-friendly insurance policies and incentives.
Foreign funding reached $36.6 billion final yr, whereas Vietnam’s commerce surplus with the United States rose to greater than $104 billion, practically thrice the $38 billion degree in 2017, when Trump took workplace. Thailand ranks second within the area, with a U.S. commerce surplus of practically $41 billion.
Relations between the United States and Vietnam have strengthened since Trump left workplace. Last yr the 2 international locations elevated their relations to a “complete strategic partnership”, the best degree of diplomatic ties provided by Hanoi. President Joe Biden referred to as Vietnam “a vital energy on this planet and a bellwether of this very important area” and eliminated the “foreign money manipulator” label imposed by Trump.
Washington has additionally supported efforts to spice up semiconductor manufacturing in Vietnam, as a part of its marketing campaign to restrict China’s entry to superior chip manufacturing.
Experts say Vietnam might enhance scrutiny of Chinese investments or launch anti-dumping investigations to please Trump, or take steps to cut back its commerce surplus by shopping for navy tools, civilian plane or liquefied pure gasoline from US firms.
“The broader problem is that Vietnam’s comparatively small financial system doesn’t have the capability to extend imports from the United States,” stated Peter Mumford, head of Southeast Asia for Eurasia Group.
“On the overseas direct funding entrance, Hanoi might modestly enhance funding within the United States, however that will do little to assuage Washington’s commerce considerations.”
Vietnam has cultivated pleasant ties with each the United States and China underneath its non-aligned overseas coverage referred to as “bamboo diplomacy.” But with any enhance in purchases from the United States, Vietnam needs to be cautious to keep away from angering China, its largest buying and selling companion and neighbor.
Investment from China additionally elevated – together with broader FDI – rising by 80% in 2023. China accounted for the biggest variety of new tasks in Vietnam this yr.
Förster famous that many Chinese items have been routed via Vietnam “to avoid tariffs, typically underneath questionable guidelines of origin and even with false ‘Made in Vietnam’ labels.”
He stated Hanoi was working to determine stricter standards for labeling merchandise, a transfer that would assist keep away from a few of the ire of the brand new U.S. administration.
Thuy Anh Nguyen, director of Vietnam-focused asset administration agency Dragon Capital, stated investments by Chinese firms might face additional scrutiny from Hanoi, however Vietnam would nonetheless entice extra overseas direct funding as producers proceed to maneuver from China.
Hanoi is more likely to “proactively alter import-export practices, negotiate commerce agreements and strengthen compliance with guidelines of origin to mitigate tariff dangers,” he added.
Additional reporting by Haohsiang Ko in Hong Kong
