Vietnam | Exports threatened by Trump trade talk

From a possible border tax to higher tariffs, America’s push to reset trade relations is putting Vietnam’s small economy at risk.

Vietnam sells a fifth of its exports to the U.S., making it one of the few Asian nations counting America as a bigger market for their goods than China. Yet Vietnam’s USD32 billion trade surplus with the U.S. puts it in the crosshairs of the White House after Trump ordered a study to identify any “trade abuse” fueling American deficits.

Trump also professed support for a border adjustment tariff to encourage production of goods in the U.S. and reduce incentives for companies to move overseas.

Higher taxes on U.S. importers would reduce Vietnam’s gross domestic product by almost 0.9 percent, the most negative effect on any Asian country, Credit Suisse Group AG economists Santitarn Sathirathai and Michael Wan said in a January report.

“If the U.S. creates a new wave of protectionism, Vietnam will be very vulnerable,” said Alexander Vuving, a Vietnam political analyst at the Asia-Pacific Center for Security Studies in Hawaii.

The U.S. will investigate countries running the biggest bilateral trade deficits to assess the extent they’re caused by “cheating or inappropriate behavior,” U.S. Commerce Secretary Wilbur Ross said.

That tone is triggering alarm in Hanoi. Prime Minister Nguyen Xuan Phuc told his cabinet that U.S. protectionist policies could hurt the economy and lead to a slowdown in exports and foreign investment.

But Hanoi may explore ways to keep TPP alive even without U.S. participation, said Michael Michalak, regional managing director of the U.S.-Asean Business Council and former U.S. ambassador to Vietnam.

One alternative would be bilateral or small-group deals with neighbors or Latin American countries on the basis of the earlier negotiations, he said. MDT/Bloomberg