US-Viet Trade Reset Possibly in the CardsA Trump golf course in To Lam’s home province could help smooth the way
By: David Brown
A reset is imminent in the US trade relationship with Vietnam. Handled well, it could benefit both countries greatly – but that will require considerably more sophistication than Donald Trump and his advisers showed during his first term as US President. A year ago, Vietnam watchers were trying to understand how the two nations would implement a ‘Comprehensive Strategic Partnership’ (CSP) US President Joe Biden and Nguyen Phu Trong, the leader of Vietnam’s Communist Party, had agreed. Certainly that had symbolic value: in Vietnam’s foreign relations hierarchy, the CSP elevated the US to the same lofty rank Hanoi in 2008 accorded China and in 2012 assigned to Russia. But considering that India (in 2016), South Korea (2022), Japan (also 2023), and Australia (2024) have also been declared comprehensive strategic partners, cynics can be forgiven for questioning if the CSPs have substantive value. Hanoi hoped that in return, Washington would acknowledge that Vietnam has become a market economy – magic words that would prompt the US to lower tariffs on Vietnamese exports – soon after its 2024 national elections.-That didn’t look very likely after US voters chose to put Donald Trump back in the White House. Trump, in 2019, accused Vietnam of being the "single worst abuser" of trade with the US, worse even than China. Although the Trump administration began the process of sanctioning Vietnam for alleged currency manipulation, the Biden administration canceled the action. Meanwhile in Vietnam, as General Secretary Trong’s life ebbed away, a police general named To Lam clawed his way to the helm of the Communist Party of Vietnam.-Lam brings a lot of energy to his new job. A keen Vietnamese observer, Nguyen Khac Giang of the Singapore-based Institute for Southeast Asian Studies, judges Lam to be “pragmatic rather than ideological, focused on economic development and political stability over doctrinal campaigns.” Lam and president-elect Donald Trump spoke briefly by phone after Trump’s victory was evident. According to the Communist Party website, “Trump expressed his respect for the relationship with Vietnam and Vietnam-US economic cooperation, and wanted to further promote it.” This time around, it appears Trump’s private interests could be helping out his public interests, As David Hutt reported in The Diplomat on November 9, “On October 8…the Trump Organization, his family business, signed an agreement with Vietnamese real estate developer Kinh Bac City Development to build a US$1.5 billion golf course and resort in Vietnam’s Hung Yen province, just outside Hanoi.” The memorandum of understanding was signed last month, Hutt reported, “while Lam was visiting the United States for the UN’s annual General Debate, by officials from the Trump Organization, the People’s Committee of Hung Yen province, and Kinh Bac City Development Holding. Trump himself attended the signing ceremony and was photographed sitting next to his son Eric Trump and Dang Thanh Tam, chairman of Kinh Bac City and a tycoon with significant political influence.” With that business done, the Trump Organization announced on January 10 that the company wouldn’t enter into new agreements with foreign governments while Trump is in office. Now it’s up to Lam and Trump to see if they can match the good vibes of the US-Vietnam CSP with a game plan that paves the way to bilateral trade harmony. From the get-go, there are huge obstacles During his 2017-21 term as US president, Trump was obsessed with US bilateral trade deficits with specific countries; Vietnam was one of these, recording large deficits in the import of manufactured goods from China and, after adding value to these goods, an offsetting surplus in its exports to the US. Not long after his father won another term in office, in a video shown at a business conference in Hanoi, the president-elect’s son and reputed close adviser Eric cited Vietnam as “among the countries that ‘ripped off’ the US.” A few days later, US trade data showed a bilateral deficit with Vietnam of US$102 billion in the first 10 months of 2024. Further, some influential American observers believe that China, Inc. is being allowed to launder export products, in particular electronic goods sent on their way to the US after repackaging in Vietnam. Ignoring Vietnam’s competitive advantages in manufacturing and labor costs, they point to its growing trade surpluses and assume that Vietnam’s exports in large part include disguised items of Chinese origin. . . . and evidence Vietnam is ‘playing it straight’ Meanwhile, microdata collated by Harvard Business School analysts shows that many of the goods imported from China have added value to Vietnam’s economy through new investments that resulted in jobs and increased production. The Harvard study concluded that this added value of imports only becomes clear by looking at trade data at the company level. On that basis, just 1.8 percent, or US$1.7 billion, of goods were likely to have been surreptitiously ‘rerouted’ in 2021. More recent analysis indicates that Hanoi has stepped up its screening of Chinese foreign direct investment.-Vietnam’s electronics sector exports to the US typically have local value added of 30 percent or more and can be legitimately branded as “made in Vietnam.” The challenge now is to move these exports up the value chain, i.e., to move beyond assembly and packaging. A brief published by the Atlantic Council in mid-2024 concludes that as a “connector economy” bridging the supply chains between the United States and China, Vietnam is being courted by both powers—and receiving substantial investment. Notably, in addition to the substantial presence of Chinese firms that have settled in Vietnam to supply components to American electronics giants (for example, Apple, Google, and Intel), more than a dozen US companies are reported to be establishing R&D centers to nurture local talent in electronics technology and the application of artificial intelligence. Going forward Absent careful preparation, before many months go by, President Trump and General Secretary To Lam seem destined to meet – and clash – on bilateral trade issues. Or, if before then, senior trade officials from both nations are directed to meet, study, resolve arguments, and map out the present state and likely course of bilateral trade relations, perhaps a debacle can be averted. Vietnam would be wise to make some concessions to American sensitivities. In that event, the chances are fair, perhaps good, that common sense will prevail in both capitals. David Brown is a former US diplomat with wide experience in Southeast Asia, particularly Vietnam, and in energy policy coordination. He is a regular contributor to Asia Sentinel This is among the stories/excerpts we choose to make widely available.If you wish to get the full Asia Sentinel experience and access more exclusive content, please do subscribe to us for US$10/month or US$100/year.
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US-Viet Trade Reset Possibly in the Cards
January 13, 2025
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