Vietnam is navigating a complex geopolitical landscape as it seeks to balance its relationship with both the United States and China. With China’s growing influence in the region, Vietnam’s Prime Minister, Pham Minh Chinh, has indicated a potential shift towards a more diplomatic approach with the US. The Southeast Asian nation currently runs a $39 billion trade deficit with us. This deficit is the third largest in the country, behind only China and Mexico. The rest of the country has enjoyed enormous benefits at China’s expense. During former President Donald Trump’s first term, thousands of businesses relocated their manufacturing operations from China to Vietnam to avoid US tariffs.
Vietnam’s advantageous strategic location has rendered it a natural and attractive destination for Chinese investment. Just look at the recent investment boom – last year Chinese companies accounted for close to one-third of all new investment commitments to Vietnam. At the same time, this influx underscores the growing role of Vietnam as a top destination for Chinese capital outflows.
Vietnam has found itself in the eye of the trade war storm. Concerns over a burgeoning trade deficit with the US continue to border on the hysterical. Through better targeting, the Vietnamese government is increasing the appeal and availability of US goods to local consumers. They have significantly reduced outward tariffs on targeted imports to spur foreign sales. This move will likely allow Vietnam to expand their share of US trade in the future. The American government continues to worry about “trans-shipments,” where Chinese goods are first sent to Vietnam before reaching their final destinations.
The threat of tariffs is still very much a live issue for Vietnam. A survey by the American Chamber of Commerce in Vietnam revealed that most US manufacturers in the country foresee potential layoffs if tariffs are imposed. Increased tariffs would pose an even greater threat. To that end, Vietnam has repeatedly communicated that it does not want to limit commerce with the US.
Stephen Olson, a senior fellow at the Hinrich Foundation, commented on the precarious situation, stating:
“These are huge red flags for Trump. My expectation is that Vietnam will at some point be hit hard by tariffs.”
Vietnamese authorities know that they’re in a precarious spot. They have made it clear that they are “being careful to avoid any moves which would signal any non-cooperation on trade issues,” as noted by Steve Norris, a trade analyst.
“I would not however expect any special treatment of Vietnam from a policy point of view. Personal relationships are important to Trump, but in this case, I believe his desire to appear tough on trade will win out.”
Vietnam’s government has been making concerted efforts to expand its web of economic partnerships while developing its own technological prowess. They’ve just declared a test deployment of SpaceX’s Starlink satellite internet service in the country. This significant decision punctuates Vietnam’s desire to strengthen its technological ecosystem and increase separation from Chinese technology.
In a bid to diversify its economic partnerships and technological capabilities, Vietnam’s government announced that it will allow SpaceX to operate its Starlink satellite internet service on a trial basis. This decision underscores Vietnam’s intent to bolster its technological infrastructure and reduce dependency on Chinese technology.