Vietnam's Trade Volatility with a New Trump Presidency

By Francesco Guarascio and Phuong Nguyen
HANOI (Reuters) – Vietnam faces trade volatility with a new Trump presidency, according to officials and supply chain experts. The country could benefit from increased U.S.-China trade tensions but might also become "collateral damage" amidst U.S. protectionist measures.

The Southeast Asian industrial hub is a major exporter to the United States, boasting a $90 billion trade surplus with Washington as of September. This surplus places Vietnam fourth largest after China, the European Union, and Mexico.

During Trump's first presidency, Vietnam gained significantly from heightened U.S. tariffs on China. Trump has threatened to impose 60% tariffs on Chinese imports in his second term, which poses significant growth risks for the world's second-largest economy.

Ahead of U.S. elections, Vietnamese officials indicated a preference for a continuation of current trade policies under a Democratic president over Trump's unpredictability. Officials expressed concerns about the large trade surplus with Washington, partly a result of Vietnam functioning as an assembly site for components predominantly made in China, which has led to U.S. sanctions over illegal transshipment in some cases.

Trump has additionally threatened taxes up to 20% on all imports, raising fears that Vietnam may become a target for such protectionism.

Despite this, experts suggest that increasing protectionism could lead to a shift in supply chains from China to other markets, with Vietnam likely remaining a favored destination for companies relocating production.

On the news of a potential Trump win, Vietnam's main stock market saw an increase, particularly driven by stocks in industrial parks, continuing this trend into the following morning.

LNG, PLANES, GOLF DIPLOMACY?
The substantial trade surplus may be reduced to ease tensions with the U.S. through significant purchases of American products, such as Liquefied Natural Gas (LNG) and potential acquisitions of Lockheed Martin C-130 Hercules military transport planes.

Adding to Vietnam's favor, The Trump Organization has partnered with a Vietnamese firm for the development of a $1.5 billion golf course and hotel.

Still, uncertainty looms. The new Trump administration "presents both opportunities and challenges for Vietnam," according to Koen Soenens, marketing director at DEEP C industrial parks.

As noted by Dan Martin, a Hanoi-based business advisor, the actual effects of a second Trump presidency will heavily depend on the scope and targets of the anticipated policy changes. While Vietnam has strong potential to attract companies relocating from China, tariffs and other trade restrictions may threaten these advantages.