Uncertainty prevails as top exporter Vietnam braces for volatility with Trump

By Francesco Guarascio and Phuong Nguyen

HANOI (Reuters) – Vietnam faces trade volatility with a new Trump presidency, officials and supply chain experts told Reuters, as the country could benefit from increased U.S.-China trade tensions but may also become “collateral damage” of U.S. protectionist measures.

The Southeast Asian industrial hub is a major exporter to the United States and had a 90-billion-dollar trade surplus with Washington as of September, the fourth largest after China, the European Union and Mexico.

The Communist-run country has been a top beneficiary of a hike in U.S. tariffs on China, which Donald Trump started in his first presidency.

Trump has threatened to impose 60% tariffs on U.S. imports of Chinese goods in his second presidency, which would pose major growth risks for the world’s second-largest economy.

However, ahead of the U.S. elections Vietnamese officials said they would had preferred an expected status quo in trade policy under another Democratic president, rather than Trump’s unpredictability, two senior officials said.

The main reason for concern, officials said, is the big trade surplus with Washington, which is partly the result of Vietnam being used as an assembling site for components still largely made in China – which occasionally has led to U.S. sanctions over illegal transhipment.

Trump has also threatened tariffs up to 20% for all imports.

Vietnam “could easily be a target for such protectionist measures and become collateral damage”, said Leif Schneider, head of international law firm Luther in Vietnam.

However, additional protectionism could accelerate the shift of supply chains from China to other markets, with Vietnam likely remaining a preferred destination for companies relocating production outside of China, Schneider added.

Vietnam’s main stockmarket rose on Wednesday on news of a possible Trump win, driven by stocks of industrial parks, and extended its gains on Thursday morning.

LNG, PLANES, GOLF DIPLOMACY?

The large trade surplus could be reduced to ease tensions with the U.S. with purchase of big-ticket items from the United States, a senior Hanoi-based diplomat noted, pointing at imports of Liquified Natural Gas (LNG) and the possible purchace of Lockheed Martin (NYSE:) C-130 Hercules military transport.

It may also help that The Trump Organization has recently partnered with a Vietnamese company to develop a $1.5 billion golf course and hotel project in Vietnam, a Vietnam-based foreign investor said.

However, uncertainty prevails, as the new Trump administration “presents both opportunities and challenges for Vietnam,” said Koen Soenens, marketing director at DEEP C industrial parks in northern Vietnam.

“While a second Trump presidency is expected to recalibrate American trade policy, the actual impact on Vietnam would heavily depend on the specific scope and targets of those policy changes,” said Dan Martin, a Hanoi-based business advisor with investment consultancy Dezan Shira & Associates.

“The potential for Vietnam to attract more companies relocating from China remains strong, yet tariffs and trade restrictions may jeopardize these gains,” Schneider added.