A survey reported that if duties are imposed, most American manufacturers in Vietnam expect forced layoffs and disruptions.
US President Donald Trump has announced plans to impose tariffs that may affect Vietnam since it is affecting Vietnam’s exports to its biggest market, which, as per the United Nations (UN), was worth over $142 billion last year or accounts for 30% of Vietnam’s gross domestic product (GDP).
Vietnam’s goods exports to the United States (US) make up 30% of its GDP, the highest percentage among the top trading partners. It makes the country highly vulnerable to reciprocal tariffs.
Foreign companies and Vietnamese officials are taking the warnings seriously, as the Southeast Asian country meets many criteria for potential reciprocal tariffs and has one of the largest surpluses with the US.
Economists agree that the Southeast Asian country imposes more taxes on American goods than the United States. It also charges value-added tax. Trump may impose reciprocal tariffs if they meet both conditions.
The country raised a white flag by suggesting decreasing charges on American goods, but it also needs to lower duties on other trading partners under current laws.
A survey to see the response to these warnings reported that if they impose the duties, most American manufacturers in Vietnam are expecting forced layoffs and disruptions.
After the first Trump administration, which started the trade war against Beijing in 2018, the Southeast Asian country saw a spike in foreign investment since the foreign multinational companies wanted to move their factories from China to its southern neighbour to avoid US tariffs.
Foxconn, a contract manufacturer from Taiwan, and Samsung Electronics, a company based in South Korea, have significant operations there.
Apple, chipmaker Intel, and footwear and apparel giant Nike are some US companies that have placed bets on the Southeast Asian country as a production hub for goods often supplied to the United States.
The Communist-run country is now a significant hub in global supply chains due to the large inflow of manufacturing investment, which has significantly boosted its economic connections with the United States. Vietnamese customs data show that Vietnam now exports 29% of its goods to its former foe.
United Nations commodities trade statistics report that Vietnam was ranked sixth among exporters to the United States last year, behind Mexico, China, Canada, Germany, and Japan, with $142.4 billion in exports.
The only country facing the same explicit threats from Trump is Mexico, where Trump has threatened to impose 25% tariffs. It exports more than three times more goods than Vietnam to the US, with the total value of its exports making up for 27% of its higher gross domestic product.
In contrast, Japan’s exports to the US are worth 3.7% of its GDP, and China is worth 2.5%.
Its vulnerability is compounded multiple times by large trade deficits, which might make it stand out when US authorities research global reciprocal tariffs, which US President Donald Trump has ordered to prepare by April.
According to the US trade data, Vietnam’s booming exports and low imports from the United States make it the US partner with the fourth largest surplus last year, behind China, the 27 countries EU, and Mexico.
Vietnam’s trade minister has said it is willing to acquire more agricultural products from the United States. An increase in farming imports is unlikely to correct trade imbalances as the total imports of farm products from the United States were worth $3.4 billion.
Trump ended his first term in the White House and declared Vietnam to be a currency manipulator.
Adam Samdin at Oxford Economics claimed that the US watches Vietnam for possible manipulations. Recently, the central bank has allowed the Vietnamese dong to weaken compared to the dollar, and the country’s ambitious growth goals could indicate that it is willing to accept an even weaker currency.
However, the central bank has stated that it will keep an eye on and adapt to Trump’s policies, and the currency rate has stayed within the allowed flexibility.
