First US-China trade war saw Vietnam thrive. Now Trump’s tariffs are a ‘back-stabbing’
Vietnam’s manufacturing boom faces a setback as Trump’s new tariffs threaten its export competitiveness
When Le Ngoc Tham became sales manager for a new industrial estate in northern Vietnam, the goal was to turn it into an easy alternative for manufacturers leaving China to avoid the tariffs of the first US-Sino trade war.
Three years later, with less than half of the 1,716-acre project completed, dozens of companies interested in leasing the land are having second thoughts. The source of hesitation is President Trump’s latest tariffs, which, as announced earlier this month, included a 46 per cent tax on imports from Vietnam, the country’s eighth-largest trading partner.
But even though Trump announced a 90-day temporary stay on the new duties on Wednesday, and the administration said late on Friday that it would exclude certain electronics from “reciprocal” tariffs, Vietnam wasn’t exactly in the clear.
A 46 per cent tariff rate, which is higher than most other nations, would make Vietnam-made products noncompetitive in the US, its largest export market. Both buyers and producers of those goods would likely turn to countries facing lower rates, dragging down industrial activity and foreign investment in Vietnamese manufacturing.
“In the short term, that will be a hit to manufacturers,” said Le, who works for the Amata Corp., an industrial real estate company based in Thailand. “So the question they ask us is: What are we going to do next?” While the owners of factories that have broken ground here have little recourse, about 40 companies that have inquired about building facilities are hitting pause – one-fifth of which were in the final stages of investment, she said.
Vietnam benefited substantially after Trump imposed tariffs on China in 2018, as companies producing goods for the US there turned to Vietnam. In Quang Ninh province and the neighbouring port city of Haiphong, the arrival of hi-tech manufacturing, including Apple suppliers Pegatron and Foxconn, contributed to the country’s rapid industrial development and strong economic growth. In 2019, Vietnamese exports to the US surged 35 per cent compared to the previous year.