^{Vietnam’s leader To Lam  | Photo Credit: REUTERS}

Vietnam, once hailed as a rising star in global trade thanks to its strategic role in the China+1 supply chain model, now finds itself navigating a tough economic crossroads. Former U.S. President Donald Trump's announcement of sweeping new tariffs could severely disrupt Vietnam’s export-driven growth — a model that has catapulted the Southeast Asian nation into one of Asia’s fastest-growing economies.

Vietnam’s Booming Trade: A Closer Look at the Numbers

Vietnam has emerged as a major global manufacturing hub over the past decade, significantly boosting its trade figures. In 2023, Vietnam recorded a total trade value of $683 billion, with exports contributing $355.5 billion and imports at $327.5 billion, according to data from Vietnam’s General Statistics Office.

The U.S. has played a pivotal role in Vietnam’s export success. In 2023, Vietnam’s exports to the United States reached approximately $97 billion, making it Vietnam’s largest export market. But discrepancies in trade data between Vietnamese and U.S. sources — largely due to valuation differences — have long sparked friction.

Trump’s Tariffs: What’s Changing and Why It Matters

Former President Trump, who is eyeing a return to office in the 2024 election, has reintroduced the idea of “reciprocal tariffs” aimed at countries running large trade surpluses with the U.S. Vietnam, with its sizable surplus, has landed squarely in the spotlight.

Trump’s proposed tariffs would not only apply to Chinese goods but extend to countries like Vietnam, India, and other ASEAN members. This escalation risks upending Vietnam’s advantageous position as an alternative to China in global supply chains.

According to Nguyen Thu Oanh, head of Vietnam’s inflation department, these new U.S. tariffs could push some foreign firms to relocate production away from Vietnam — a serious blow to the country's foreign direct investment inflow, which reached $36.6 billion in 2023, a 13.5% year-over-year increase.

The ‘China+1’ Strategy at Risk

For years, Vietnam has benefited from global manufacturers seeking to diversify away from China — a strategy known as China+1. This helped Vietnam attract major players like Apple, Samsung, and Nike to expand operations there. But now, economists at OCBC Bank warn that reciprocal tariffs could derail this momentum.

“The reciprocal tariffs on ASEAN and India will hurt the ‘China+1’ strategy that has benefited the region for some years now,” OCBC analysts noted. “However, global supply chains won’t shift overnight — it will take time.”

Tough Negotiations Ahead for Vietnam

While countries like South Korea and Japan may find common ground quickly with Washington, Vietnam’s high trade surplus with the U.S. complicates negotiations. Chetan Ahya, chief Asia economist at Morgan Stanley, said Vietnam faces a more difficult road compared to its regional peers due to its role in Chinese supply chain rerouting.

In an effort to deescalate tensions, Vietnam’s Communist Party chief To Lam reportedly told Trump during a recent call that the country is prepared to eliminate tariffs on U.S. imports, effectively bringing them to zero, if Washington agrees to do the same for Vietnamese exports.

Hanoi also pledged to increase imports of American goods, including energy and agricultural products, and encouraged U.S. companies to invest more in Vietnam’s growing tech and manufacturing sectors.

White House Response: Not Buying It

Despite Hanoi’s olive branches, U.S. officials aren’t impressed. Peter Navarro, former White House trade advisor, dismissed Vietnam’s zero-tariff proposal, claiming that “non-tariff barriers” are the real issue.

Navarro pointed to:

• Chinese goods rerouted through Vietnam to avoid U.S. tariffs
• Intellectual property violations
• Vietnam’s value-added tax (VAT) as a hidden barrier

“Saying ‘we’ll go to zero tariffs’ means nothing if they’re still cheating through nontariff means,” Navarro told CNBC.

Vietnam’s Concessions: LNG, Cars & Satellites

To showcase goodwill, Vietnam has offered trade concessions including:

• Lowering tariffs on liquefied natural gas (LNG) imports from the U.S.
• Reducing import duties on U.S. automobiles
• Allowing a pilot rollout of Starlink satellite internet services in the country

These steps aim to foster deeper commercial ties with Washington and soften criticism regarding Vietnam’s trade practices.

The Bigger Picture: China’s Moves and Regional Caution

In contrast to Trump’s tariff push, China has retaliated swiftly, slapping an additional 34% tariff on U.S. imports. Yet, most other Asian economies have opted for diplomacy over confrontation, fearing economic instability.

According to Michael Wan, senior Asia economist at MUFG Bank, countries with significant trade surpluses with the U.S. — such as Vietnam — may struggle to extract meaningful concessions from Washington.

“Negotiations may bear some fruit,” Wan said, “but don’t expect the U.S. to drastically lower proposed tariffs anytime soon.”

What Lies Ahead for Vietnam?

Vietnam is now at a critical inflection point. The country must balance its thriving trade relationship with the U.S. while addressing growing concerns over trade transparency and regional economic tensions.

While the short-term impact of Trump’s proposed tariffs remains uncertain, the potential long-term consequences could be substantial. For a nation that has built its prosperity on open markets and smart diplomacy, maintaining that balance will require deft negotiation, strategic reforms, and stronger global alliances.

‍