What Happened
The U.S. trade deficit with Vietnam reached a new high of $111.6 billion in January-November 2024 and is growing, according to new trade data published by Reuters on Jan. 8. This data entrenches Vietnam’s position as the trade partner with the fourth-largest trade surplus with the United States.
Why It Matters
Vietnam’s reliance on exports to the United States, its top export market, leaves it acutely vulnerable to potential trade restrictions. Tariffs would severely impact its industrial base and pose attendant risks for U.S. multinational operations in the country, such as those of Apple, Google, Intel and Nike. Vietnam’s central bank has announced it will intervene in foreign exchange markets to mitigate these risks, but this carries its own risks of U.S. allegations of currency manipulation. In the short term, Vietnam will face a heightened risk of U.S. tariffs and other retaliatory measures; in the longer term, this will incentivize Vietnam to diversify its export markets. If the incoming U.S. Trump administration does impose tariffs, it could drive manufacturing from Vietnam to other regional locales and beyond. In a broader geopolitical context, the United States would risk weakening its influence in Vietnam and alienating Hanoi by hyperfocusing on this issue, potentially undermining a key piece of its broader China containment strategy.
Background
The rising trade imbalance correlates with the weakening of the Vietnamese dong, increasing the potential for scrutiny regarding currency manipulation. The release of the trade data comes ahead of U.S. President-elect Donald Trump’s Jan. 20 inauguration, when risks of tariffs and other restrictive trade measures on Vietnam will rise.
Source: Stratfor | January 8, 2025