Trading War For Golf

In late May this year, Vietnamese Prime Minister Pham Minh Chinh and son of U.S. President Eric Trump met and brokered a deal for three eighteen hole golf courses just outside of Hanoi. Eric Trump also floated the idea of building an illustrious skyscraper in a follow up meeting in Ho Chi Minh City, promising to visit the country often. Despite Vietnam’s unique property laws, the Vietnamese government and local authorities moved to fast-track the approval for the project with real estate firm Kinhbac City.

As the July 8th tariff implementation deadline approaches, the Trump administration has made demands of Vietnam such as decoupling from Chinese tech and reducing the amount of goods reportedly being shipped from China to Vietnam and then exported as ‘Made in Vietnam’ to avoid being slapped with tariffs. Negotiations have been described as “tough” by Vietnamese constituents concerned over the demands. It’s clear why Vietnam might make exceptions to their rules for the Trump family enterprises – government officials want a better trade deal than the one they’re facing.

In the U.S.’s first trade war with China, the huge winner ended up surprisingly being Vietnam. With President Trump’s commitment to ethics in his second term noticeably duller than his first,  Vietnam would like to keep winning. Vietnam can do so by first, not rushing to abandon their relationship with China regardless of U.S. pressure and then, continuing to advance their technology sector. 

Vietnam runs a high trade deficit with China but an impressive surplus with the U.S., part of the reason their tariffs are among the highest the Trump administration suggested. A majority of goods traded between Vietnam and China are involved in building semiconductors, circuit boards, electric vehicles, phones, etc. Trump is suggesting that Vietnam begin to develop their own manufacturing for these sectors which Vietnamese officials note while not impossible, building out new supply chains is not a straightforward endeavor and it would require months or years of gradual change to reduce dependency given Vietnam’s current mid-tier role, decidedly not the immediate switch the Trump administration is leading the charge for. This has been Trump’s modus operandi domestically as well – charge tariffs to promote homegrown industrialization, regardless of if the infrastructure necessary to be ‘American Made’ is even currently utilizable.

Vietnam relies on China for the machines necessary to manufacture, the foreign investment needed to further industrialize, and the countries share a longer standing comprehensive strategic partnership. Vietnam’s economy grew 7.09% last year, and the year before that, over 5%. Even during the pandemic, Vietnam managed to grow 2.9%, which was among the highest in the world. Despite disputes in the South China Sea, China and Vietnam remain allies. Now is not the time for Vietnam to abandon their largest import partner if they want to continue current trends of growth. While Vietnamese people by and large view the U.S. more favorably than China, by threatening Vietnam’s emerging economy and slashing USAID funding worldwide, the U.S. is in danger of losing its ‘soft power’ on Vietnam over unpopular tariffs. Still, the money flowing through Hanoi via the Trump Organization is not flowing to the place in desperate need of funds and the source of controversy – technology. 

Vietnam is readily poised to become a powerhouse in the technology industry – the Trump administration is right to encourage Vietnam’s growth in tech. In the last five years, Ho Chi Minh City (the supposed location of Trump’s next tower) alone has garnered over 2.86 billion in industrial zones, with the tech sector garnering over 10% growth year after year in the country as whole. Although Vietnam is admittedly about 10-20 years behind China in terms of infrastructure, the government has set a goal to grow from 1% to 8-9% of the global chip market in the next seven years. Vietnam is already making the strides necessary to decouple from Chinese tech at a pace that doesn’t upset the economy and is mutually beneficial as sudden changes to the industry that employs over 1.3 million and accounts for over 18% of Vietnam’s GDP would be catastrophic. Even after the US Geological Survey slashed Vietnam’s estimated rare earth metals, Vietnam holds the second largest reserves behind China, meaning with proper time and foreign investment Vietnam could be as essential to the global supply chain for EV’s, computers, and other necessary electronics as China currently is. The U.S., accounting for a third of Vietnam’s exports, should be encouraging investment from all parties – without strings attached – as it brings Vietnam’s bright future as a tech hub closer to fruition. Given a majority of Vietnam’s GDP is trade and tariffs continue to loom, The Trump administration is too unstable to rely on.

Vietnam is in a unique position as an upcoming economic powerhouse in Southeast Asia, yet is the target of ire from what typically is a close trading partner. Vietnam has several paths to win – rely on other close trading partners to fill the gap of the U.S. market if trade negotiations go south, manifest a deal regarding rare earth metals in return for investment into industrialization with either/both countries, assure U.S. officials that Vietnam is not a front for Chinese goods to be moved sans tariffs, or end up right back where they started. The Trump Administration’s move to isolationism leaves many countries in the dust lest they submit to sometimes damaging demands. Vietnam does need investments from the global community to make these changes and holding onto a relationship with China and the U.S. behooves them. However, with large reserves of rare earth metals in Vietnam’s grasp and moves to expand their breadth of manufacturing plants, soon the U.S. will need Vietnam’s help and not the other way around. It may be decades in the making, but Vietnam is laying the groundwork to an impressive future. Now is the time for the U.S. to decide if it will be on the winning team with them.