US and Vietnam Upgrade Economic Ties in Landmark Visit by Joe Biden 

US and Vietnam Upgrade Economic Ties in Landmark Visit by Joe Biden

US and Vietnam Upgrade Economic Ties in Landmark Visit by Joe Biden (Source : Shutterstock)

In an important diplomatic move, the United States and Vietnam have upgraded their diplomatic status with each other, with an eye on strengthening supply chains and containing China. This partnership comes at a time when global disruptions have highlighted the need to diversify away from China, and the United States sees Vietnam as a key player in achieving this goal. 

President Joe Biden’s visit to Vietnam, following his participation in the G20 summit in New Delhi, was marked by the signing of a “comprehensive strategic partnership” with the leader of Vietnam’s ruling Communist Party, Nguyen Phu Trong, the highest level of diplomatic ties between the two nations. The visit sought to bolster support against Beijing’s growing diplomatic influence in the region. President Biden highlighted the progress made over the past five decades since the Vietnam War, from conflict to normalisation and new strategic partnerships. 

Part of a new China containment strategy 

 Biden’s visit to Vietnam underscores the evolving dynamics in the Indo-Pacific region as the United States seeks to forge stronger ties to address China’s rising power. The United States has been pursuing a more engaged role in the Indo-Pacific, particularly in the South China Sea, where China has been expanding its influence. The United States sees Vietnam as a key ally in this, as Vietnam has territorial disputes with China in the South China Sea. Vietnam is navigating a delicate balance between its relations with the US and China as it simultaneously seeks to establish itself as a competitive low-cost manufacturing hub. 

The United States has also identified Vietnam as a critical partner in efforts to reduce economic dependence on China, particularly in sectors such as semiconductors and rare earth minerals, vital for high-tech industries and national security. President Biden’s recent moves, such as restrictions on US investment in sensitive sectors like semiconductors, quantum computing, and artificial intelligence, reflect the United States’ efforts to address concerns related to China’s influence and technological dominance.  

While the diplomatic upgrade holds strategic importance, it is not solely focused on countering China. The US is engaged in building a network of allies and partners in the Indo-Pacific region, including the Philippines, India, Japan, and South Korea. These partnerships serve broader goals of stability, economic cooperation, and shared interests rather than solely being a reaction to China’s actions. 

Not just strategic but a technological and business partnership, too 

 Semiconductors and rare earths were central topics during the meeting. The US government, under the CHIPS Act, has allocated funds to support semiconductor supply chains globally, with Vietnam expected to receive a significant portion. Additionally, the partnership aims to address the critical issue of skilled workforce development in the semiconductor sector, given Vietnam’s shortage of engineers. 

In addition to semiconductors, the discussions between the US and Vietnam also covered the supply of rare earth minerals crucial in the manufacturing of smartphones and electric car batteries. Vietnam boasts the world’s second-largest deposits of rare earth minerals after China, making it a key player in diversifying supply chains away from China. 

The visit resulted in the signing of agreements between US companies and Vietnam to expand operations in the country. Microsoft, for example, is planning to develop a “generative AI-based solution tailored for Vietnam,” while chipmaker Nvidia is partnering with Vietnamese companies FPT, Viettel, and Vingroup. Additionally, Vietnam Airlines intends to purchase 50 Boeing 737 MAX jets, and Honeywell will collaborate with a Vietnamese partner on a project to develop Vietnam’s first battery energy storage system. 

Several prominent American companies have already invested in Vietnam’s burgeoning tech sector. Intel, for instance, operates a $1.5 billion chip assembly, packaging, and testing facility in southern Vietnam, with expansion plans on the horizon. Similarly, Amkor is in the process of constructing a state-of-the-art semiconductor assembly and testing mega factory near Hanoi.  

Relationships will only grow closer despite certain Cold War-era hangups 

 However, this diplomatic upgrade may be complicated by reports of Vietnam’s talks with Russia over a new arms deal, along with suggested plans for a Vietnamese-Russian oil venture in Siberia. Furthermore, there are also human rights concerns, given Vietnam’s record of limiting press freedom and suppressing activists. The US administration maintains that it raised human rights and democracy concerns in private discussions. 

Despite these complexities, the US administration seems to be strongly committed to expanding its relationship with Vietnam, including in the security dimension, and Biden’s visit to Vietnam is an opportunity to deepen these partnerships and expand economic, technological, and security cooperation. As Vietnam grows in economic clout and China grows increasingly belligerent, the future of relations between the two countries looks extremely bright.  

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