Can Vietnam Navigate New US Import Taxes Through Golf?

Nations globally are preparing for Donald Trump’s anticipated “Liberation Day in America!!!” set for next week.

The deadline for the US President to implement reciprocal tariffs on trade partners follows closely after he applied a 25% import tax on foreign car manufacturers.

Vietnam could find itself at risk from Trump’s latest tariffs, given its significant trade deficit with the US and its status as a favored destination for companies relocating from China to evade the measures that were introduced during his previous term.

While some nations have retaliated against Washington, Vietnam’s Prime Minister, Pham Minh Chinh, has indicated a preference for a more diplomatic route.

In January, he mentioned he would happily visit Trump’s Mar-a-Lago resort in Florida and “golf all day long” if it “benefited” his country, prompting laughter from the audience.

Does this strategy have merit?

Trump has previously claimed that Vietnam is “worse than China” and “one of the worst abusers”.

However, he has not specifically targeted Vietnam with tariffs yet, despite it having the third-largest trade deficit with the US, behind only China and Mexico.

Experts suggest Vietnam is making effective strides to engage with Washington, but these efforts might not be sufficient to evade most of Trump’s tariff proposals.

“The Vietnam PM appears to be following the lead of former Japanese PM Shinzo Abe, who fostered a strong personal rapport with Trump through their mutual affinity for golf,” stated Stephen Olson, a former US trade negotiator.

“Yet, I do not anticipate any preferential treatment for Vietnam from a policy perspective. Personal connections hold significance for Trump, but in this instance, I believe his inclination to appear tough on trade will prevail.”

Vietnam has asserted that it does not intend to “restrict trade” with the US, even though it currently applies some taxes on imports from the country.

This week, the government announced that SpaceX, owned by Trump’s close associate Elon Musk, will be allowed to operate its Starlink satellite internet service in Vietnam on a trial basis.

Some analysts regard this as one of Vietnam’s strategies to evade the imposition of US tariffs.

Additionally, Hanoi announced it will reduce tariffs on various US imports, including energy and automobiles, a move aimed at “improving trade balances”.

This decision surfaced less than two weeks after Vietnamese and US firms inked more than $4 billion (£5.4 billion) in agreements, spanning sectors such as oil and gas exploration.

Steve Norris from the consultancy Control Risks mentioned, “Vietnam is being cautious to avoid any actions that would suggest a lack of cooperation on trade matters.”

This tactic aligns with its foreign policy – dubbed “bamboo diplomacy”. Much like bamboo that bends with the wind, Vietnam aspires to be flexible under foreign pressures.

“Should the US escalate pressure on Vietnam, the government might respond with incentives to boost investments in hospitality and casino sectors, procure advanced machinery, and explore the possibility of accessing Vietnam’s rare earth minerals,” Mr. Norris added.

A significant factor hindering Vietnam is the apprehension regarding Chinese influence.

During Trump’s initial term, Vietnam was among the primary beneficiaries of the US-China strain.

In 2018, he imposed tariffs on China, causing numerous companies to reconsider their production bases. Some opted to transfer their manufacturing to Vietnam.

Consequently, Vietnam experienced a boost in exports to the US, thanks to Chinese firms relocating production there.

Former US trade negotiator Wendy Cutler noted that Vietnam has become a “favorable location for substantial Chinese investment”.

While the US remains Vietnam’s top export market, China serves as its largest goods supplier, accounting for over a third of all imports, according to the latest official statistics.

Chinese companies were responsible for nearly 33% of new investments in Vietnam last year.

“These are significant warning signs for Trump. I anticipate that Vietnam will eventually face tough tariffs,” Mr. Olson remarked.

Nevertheless, imposing tariffs on Vietnam could also impact US businesses like tech giants Apple and Intel, along with sportswear brand Nike, which have shifted production from China to Vietnam.

A recent poll conducted by the American Chamber of Commerce in Vietnam revealed that the majority of US manufacturers in the country anticipate staff layoffs if tariffs are enacted.

The US President believes these tariffs will stimulate the national economy by motivating more businesses to manufacture within the US, generating significant revenue through taxes.

Nonetheless, many economists have cautioned that such tariffs might raise prices for American consumers and adversely affect global trade.

Washington is closely monitoring “trans-shipments” – Chinese merchandise flowing through Vietnam en route to third-party nations.

US officials have been “subtly urging Vietnam to gradually reduce its trade surplus and combat the trans-shipment of Chinese goods,” noted Mr. Norris.

Vietnam’s Prime Minister has expressed confidence in his administration’s capacity to “manage the relationship with the US”.

With the Southeast Asian nation having lowered certain tariffs on US products, these goods may become increasingly appealing to Vietnamese consumers, enhancing the US’s share of trade with Vietnam.

And let’s not forget golf – partaking in a game with Trump has proven beneficial for the late Japanese PM Shinzo Abe.

Abe and Trump cultivated a friendship documented through numerous golf games, which arguably aided Abe in securing tariff exemptions for Japan’s vital automotive sector at that time.

As of now, it remains uncertain whether Vietnam will truly engage in golf diplomacy.

The genuine challenge will materialize next week when a new array of Trump’s tariffs is scheduled to be implemented.