Vietnamese see positives in Trump tariffs
Sitting down for an interview at Vietnam’s Government Office in Hanoi, Prime Minister Nguyen Xuan Phuc is a man in a hurry.
As an aide wipes away sweat from his forehead, Phuc explains that he’s running late and needs to soon rush off to a meeting with investors in town for a World Economic Forum event. His message, he says, is simple: Vietnam is doing everything it can to emerge from the U.S.-China trade war unscathed — and potentially better off than before.
“It is bringing both opportunities and challenges to us,” Phuc said, waving off staff members who try to end the interview after only a handful of questions. “But more opportunities than challenges.”
Vietnam’s leaders have reason to hustle: The country’s economy is more dependent on trade than any nation in Asia apart from Singapore, relying on sales of smartphones, shoes and shrimp to stoke one of the fastest growth rates in the world. More trade barriers, and higher prices from suppliers, put that expansion at risk.
Yet the long-term opportunity is also impossible to ignore. As President Donald Trump threatens tariffs on all goods from China, companies already burdened by higher wage costs are accelerating plans to shift production to other countries — and neighboring Vietnam is well placed to benefit.
The nation of 96 million
people has embraced free-market reforms over the past few decades, leading to surging growth under an authoritarian oneparty Communist government that offers the same political stability as China. What’s more, workers in Vietnam are two-thirds cheaper than in China and nearly just as productive, according to a July report by VinaCapital, an investment company with $1.8 billion in assets.
Several large manufacturers have already made significant bets on Vietnam. The biggest is Samsung Electronics Co., which accounted for about a quarter of the country’s exports last year. Other companies, including LG Electronics, Intel Corp. and Nestle, also have a sizable presence.
To make Vietnam an attractive manufacturing destination, Phuc’s government has signed as many freetrade agreements as possible. It just reached a deal with the European Union,
soon after inking the revamped Trans-Pacific Partnership, which Trump withdrew from when he took office last year.
“Vietnam has the busiest trade negotiation team in the Asean,’’ said Eugenia Victorino, an economist at Australia & New Zealand Banking Group in Singapore.
That hard work has paid off in recent years as Vietnam has moved up the value chain. Electronics now account for a third of the country’s overseas sales, up from 5 percent a decade ago, while exports of garments and agricultural goods remain strong.
Vietnam also has managed to pull off a rare feat: Expanding sales to the U.S. while largely avoiding the wrath of Trump over a growing trade imbalance. It recorded the sixth-highest trade surplus with the U.S. in 2017, after China, Mexico, Germany, Canada and Japan — all of which have been targets of Trump’s attacks. While Trump could start piling on Vietnam anytime, he’s got reason to hold fire. Most of Vietnam’s exports to America consisted of low-end garments and footwear. High-tech sales to the U.S. amounted to about $8 billion last year, compared with $250 billion for China, according to VinaCapital.
The other incentive is strategic. Despite fighting a war that killed upward of several million people, the U.S. and Vietnam are moving closer together militarily to counter China’s growing power — particularly in the disputed South China Sea.
Americans may be more popular in Vietnam than anywhere on the planet. A Pew Research Center survey last year found that 84 percent of the country viewed Americans favorably, the most among the 36 countries surveyed. That compares with 10 percent for China, the lowest of any nation.
For Vietnamese authorities, the widespread antipathy toward China is a tricky issue. In June, thousands of Vietnamese in Ho Chi Minh City protested special economic zones with 99-year land leases over fears they would lead to Chinese encroachment, as well as cybersecurity legislation that could curb online freedoms.
The government ended up delaying the land bill and moving forward with tougher restrictions on the internet, showing that it has little tolerance for dissent. Activists and bloggers who challenge the legitimacy of the party and government are frequently jailed.