EnPresident Tran Dai Quang and President Trump discussed regional security and trade issues on February 14, including a forthcoming call at a Vietnamese port by the USS Carl Vinson according to a White House readout. While unlikely to help local relations, the visit is unlikely to trigger hostilities in the South China Sea – that’s more of a “black swan” risk as outlined in our 2018 Outlook. The two Presidents also “pledged to deepen and expand bilateral trade that is fair and reciprocal”.
The American tone in terms of trade with Vietnam has been surprisingly dovish in comparison to other Asian nations which it has a trade deficit with including China, Japan and South Korea. That may reflect the local geopolitics, though with the Vietnamese trade surplus reaching $38.3 billion in 2017 – Panjiva data for U.S. imports and exports shows – after rising 4.7% on a year earlier that may eventually change. Notably Vietnam has also been responsible for 23.5% of the increase in the U.S. trade deficit in the past three years.
Source: Panjiva
Should President Trump lose patience and seek to apply tariffs to Vietnamese goods, he will find most imports are focussed on consumer goods. Outside of high tech products (mobile phone imports were worth $4.32 billion, or 9.3% of total imports in 2017) the largest import lines are in apparel ($11.1 billion), footwear ($5.5 billion) and furniture ($4.6 billion). Without a significant build-up in American manufacturing capacity of those products any tariffs could either drive production to other countries – much of which had already migrated from China to Vietnam – or simply lead to higher prices.
Source: Panjiva
