Vietnam struggles to avoid the Trump administration’s glare

Vietnam’s rising trade surplus with the United States may threaten its close strategic and economic bilateral ties under the second Trump administration.

Vietnam and the United States have built close strategic and economic ties over the past two decades, despite ongoing challenges in the relationship like Hanoi’s rights record and its continuing desire to hedge between China and the United States.

During both the Trump and Biden administrations, Vietnam, along with many other states in South and Southeast Asia such as Malaysia, Indonesia, India, and to some extent Thailand, Bangladesh, and the Philippines, benefited enormously from a combination of trends that led to rising investment in Vietnam and much of Southeast Asia. These trends included growing U.S. government concerns about various types of trade, certain U.S. tariffs on Chinese products, and the rising fears of many foreign companies (not just U.S. ones) about investment and sales challenges in China. These challenges include the security of their information technology in China, a weak Chinese consumer market for many foreign products, growing restrictions on foreign firms in China, and an increasingly repressive stance from Beijing toward both political dissent and the private sector (Chinese and foreign). Indeed, Vietnam—a stable site for investment with a sizable workforce focused on a wide range of manufacturing—has witnessed a massive boom in investment in recent years. This has come not only from U.S. companies but also from large inflows of investment from major South Korean and Japanese firms, some of which have received government assistance and pressure to move out of China and consider Vietnam.  

Vietnam recently reported 7 percent growth in 2024, according to Reuters, outstripping that of most of its neighbors and certainly surpassing China’s rate. As Reuters reported, “Vietnam’s economy expanded 7.09 percent last year to $476.3 billion, faster than the 5.05 percent expansion in 2023, driven by strong exports and robust foreign investment inflows, government data showed on Monday [January 6].”

Now, however, Vietnam faces a challenge with the second Trump administration, even more so than many of its neighbors. While the incoming president has been inconsistent on many aspects of his foreign policy, one continuous thread has been his extreme distaste of trade deficits, especially large ones, with other countries, whether or not they are U.S. partners or even allies. In the first Trump administration, much of that focus on trade imbalances was targeted at China, Japan, and some of the United States’ near neighbors. Trump did not express any significant animus toward Vietnam in his first term, even though the country has long run a trade surplus with the United States.

With such strong export-led growth—in part stoked by the very policies that have pushed investors out of China and into northern Vietnam in particular—Vietnam has a sharply rising trade surplus with the United States. By the end of last year, its surplus was up 20 percent year-on-year with the United States, compared to 2023, according to Reuters. Vietnam now has the third-highest trade surplus with the United States of any country in the world.

There is little reason to believe that the surplus will not continue to grow absent any intervention from Washington. Reuters further noted that one of Trump’s sons, Eric, has told investors in Vietnam that the country has “ripped off” the United States. So, it is certainly possible that Vietnam, which lacks some of the abilities to retaliate with tariffs like China or Mexico or to rapidly increase its purchases of U.S. goods to better balance the trade relationship, will be an early target in the second Trump administration if the president focuses on the trade surplus.

On the other hand, Vietnamese officials, usually quite savvy about their relationship with Washington, have been preparing for this possibility for several years. They have quietly been advocating to U.S. officials and security experts about the importance of the bilateral strategic relationship, especially if the second Trump administration intends to de-emphasize aspects of the U.S. security presence in Europe and instead strengthen the coalition of allies and partners. This coalition could be necessary in the event of a quarantine of Taiwan, a conflict in the South China Sea, or other potential U.S.-China confrontations in Southeast Asia. That U.S.-Vietnam strategic relationship extends to extremely close military to military ties, as well as strong links to many senators influential on Asian affairs. Those links, along with even higher Trump 2.0 tariffs on China, may ultimately save Vietnam from bearing major economic losses from a second Trump term. 

By Joshua Kurlantzick –  Council on Foreign Relation – January 7, 2025