The globalists get cornered in Trump economy.
"Vietnam found the sweet spot in the global economy during President-elect Donald Trump's first trade war with Beijing: smack in the middle of the U.S. and China.
The country became a magnet for Chinese manufacturers looking for a production base from which to ship their goods to the U.S. tariff-free. Buoyed by a gusher of foreign investment and booming exports to the U.S., Vietnam's economy has grown around 8% a year since Trump placed tariffs on Chinese goods six years ago.
Now Trump and his team are signaling that they intend to slam this backdoor shut, meaning pain for Vietnam's small economy and likely higher prices for U.S. consumers who buy Vietnamese goods and U.S. companies supplied by Vietnamese factories.
The country now provides a third of the sports shoes, half of the wooden beds and dining tables, and a quarter of the solar cells imported by the U.S.
In once-sleepy northern provinces, rice paddies have given way to billion-dollar factories assembling smartphones and semiconductors. U.S. companies with suppliers in Vietnam include Apple, Nike and Gap.
But in May, Jamieson Greer, Trump's nominee for U.S. trade representative, said the U.S. should tighten rules to prevent "third-country workarounds," in which goods that contain a lot of Chinese parts or were made in a third country by a subsidiary of a Chinese company enter the U.S. without the steep tariffs they would have faced had they come direct from China.
Vietnam and Mexico are among those countries where Chinese companies have built bridgeheads into the U.S. market.
Vietnam is a trade target of the incoming administration in other ways, too. The president-elect has floated the idea of levying tariffs on all imports into the U.S., and talks about forcing countries to close their trade gaps with the U.S. Vietnam exports to the U.S. nine times as much as what it imports from the country. In 2019, Trump said Vietnam was the "single worst abuser of everybody" on trade, a charge Hanoi denies.
Still, some in Vietnam say Trump's focus on China and Mexico will allow Vietnam to fly under the radar, ultimately driving more foreign investment into the country. And any new tariffs on Vietnamese goods will likely be lower than those Trump levies on China, helping Vietnam maintain its competitive edge.
"A lot of the things that made Vietnam attractive during Trump's first term are still the same," said Thuy Anh Nguyen, a country specialist at Dragon Capital, a Ho Chi Minh City-based asset manager, citing improved infrastructure and low costs.
For some tech companies especially, Vietnam is still a big draw. U.S. chip juggernaut Nvidia said this month that it plans to open an artificial intelligence research-and-development center in Vietnam.
South Korea's Samsung, which has invested more than $22 billion in Vietnam, recently agreed to construct a $1.8 billion new factory making diode displays.
Apple, which began diversifying its supply chain from China in recent years, has about 35 suppliers with production in Vietnam, assembling iPads, MacBooks and its earphones there.
Vietnam's success in straddling the U.S. and China reflects its favorable demographics and geography. A country of 98 million with a young and cheap labor force, it borders China, allowing easy shipments of materials and parts to factories. Vietnam has also been diplomatically adept in its dealings with Washington and Beijing.
In November, U.S. companies including fashion designer Steve Madden and Acushnet, the maker of Titleist golf balls and FootJoy golf shoes, talked in investor calls about moving shoe production to Vietnam from China. Acushnet said it would make all of its shoes in Vietnamese factories by the end of 2025.
Since Trump's first term began in 2016, Vietnam has attracted almost $290 billion in foreign investment, nearly as much as in the previous two decades. South Korea and Japan are among its biggest investors, but China has been rapidly catching up. China and Hong Kong have invested $54 billion there in the same period, 10 times as much as U.S.-based companies.
There are some signs of caution. Since Trump's election win, some Taiwanese electronics manufacturers have started reconsidering possible new investments in Vietnam, fearing that his administration will put tariffs on Vietnamese exports or target the country for other alleged trade violations.
Vietnam also has problems with corruption and a shortage of skilled manpower. And it still relies heavily on components and intermediate goods from China. This lack of an ecosystem for components has sent business looking into countries such as Thailand, which have more local raw material manufacturing, or sometimes even back to China." [1]
1. World News: Second Trump Trade War Will Be Harder on Vietnam. Lin, Liza;
Douglas, Jason; Feng, Rebecca. Wall Street Journal, Eastern edition; New York, N.Y.. 21 Dec 2024: A9.
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