Why Trump thinks Vietnam is worse than China on trade

July 02, 2019 11:57
Vietnamese workers are considered hard-working, flexible and obedient. Photo: Reuters

In a recent interview, US President Donald Trump called Vietnam the "single worst abuser" of trade ties with the United States, and that the country takes advantage of the US even worse than China does.

Vietnam is widely believed to be the biggest winner in the relocation of the supply chain away from China. A large number of garment, plastic, toy and electronics makers have moved their factories to Vietnam due to rising labor costs and tighter environmental protection rules in China.

But why Vietnam among all Asian countries?

India, Pakistan and Indonesia have a bigger population than Vietnam. And the labor costs in Cambodia, Myanmar and Laos are cheaper, while workers in Philippines and Malaysia are better educated.

One reason is that Vietnam's government has been actively pushing Chinese-style reform and opening up of its economy. Also, Vietnamese workers are considered hard-working, flexible and obedient, just like their Chinese counterparts in the 1980s.

While Vietnam is exporting a lot to the US, as a developing country, it is not yet wealthy enough to consume high-end US products such as iPhone and Tesla cars. The result is a quickly widening trade imbalance between the two nations.

Vietnam's exports to the US totaled US$49.2 billion last year, while its imports from US only reached US$9.7 billion. That's a trade surplus of US$39.5 billion.

This trade gap is the already the fifth largest for the US among its trade partners. The US runs the biggest trade deficit with China, followed by Germany, Mexico and Japan.

The US trade deficit with Vietnam surged 44 percent in the first four months of 2019 from a year ago. It won't be a surprise if Vietnam replaces Germany for the second spot in a few years.

This explains why Trump regards Vietnam as a worse trade counterparty than China.

This article appeared in the Hong Kong Economic Journal on June 28

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist