How Vietnam can parry and dodge Trump’s tariffs

Vietnam’s remarkable economic ascent over the past decade has positioned it as a key manufacturing hub and a preferred alternative to China in global supply chains. However, with President Donald Trump’s administration intensifying scrutiny over trade imbalances, Vietnam’s substantial trade surplus with the U.S. has rendered it vulnerable to potential tariffs and other protectionist measures. In 2024, Vietnam’s trade surplus with the U.S. reached a record $123.5 billion, making it one of the largest in Asia.

To mitigate the risks associated with potential U.S. tariffs, Vietnam is adopting a multifaceted strategy:

1. Diversifying Export Markets: Reducing dependence on the U.S. market is paramount. By strengthening trade partnerships with the European Union, Middle Eastern countries, and ASEAN neighbors, Vietnam aims to find alternative destinations for its exports, thereby lessening the impact of any U.S. trade actions.

2. Enhancing U.S. Relations Through Increased Imports: To address the trade imbalance, Vietnam has expressed readiness to boost imports of U.S. goods. Trade Minister Nguyen Hong Dien conveyed intentions to U.S. Ambassador Marc Knapper to open Vietnam’s market further to American agricultural products, including cotton, soybeans, and tree nuts.Additionally, Vietnam is negotiating purchases of liquefied natural gas and Boeing aircraft, and is in discussions to acquire military equipment from U.S. defense contractors.

3. Attracting Strategic Investments: Vietnam is facilitating foreign investments that align with U.S. interests. Notably, plans are underway to allow Elon Musk’s Starlink to provide satellite internet services in the country, marking a significant policy shift. This move is perceived as an “olive branch” amid concerns about potential U.S. tariffs and aims to reduce Vietnam’s trade surplus with the U.S.

Despite these proactive measures, the Vietnamese business community remains apprehensive. A survey by the American Chamber of Commerce in Vietnam revealed that nearly two-thirds of U.S. manufacturers in the country anticipate workforce reductions if tariffs are imposed. Furthermore, 81% of respondents expressed concerns that such tariffs could disrupt supply chains, with many considering diversifying away from the U.S. market.

In summary, while Vietnam’s economic success has been notable, its heavy reliance on the U.S. market necessitates strategic adjustments. By diversifying export markets, increasing imports from the U.S., and attracting strategic investments, Vietnam aims to navigate the challenges posed by potential U.S. protectionist policies and sustain its growth trajectory.

Cre: How Vietnam can parry and dodge Trump’s tariffs – Asia Times