ASSESSMENTS

Vietnam's Balance Between Great Powers May Start Skewing West

Jul 31, 2019 | 09:00 GMT

A garment worker prepares shirts for shipment in a factory in Hanoi, Vietnam, on May 24, 2019.

A garment worker prepares shirts for shipment in a factory in Hanoi, Vietnam. Vietnam seeks to move up the industrial value chain as some manufacturing leaves China.

(MANAN VATSYAYANA/AFP/Getty Images)

Highlights

  • The U.S.-China trade war has escalated Vietnam's move up the industrial value chain in recent years by more deeply integrating Hanoi's economy with manufacturers seeking refuge from the fallout. 
  • But with the sixth-largest trade surplus with the United States, Vietnam now risks becoming the target of the White House's next trade salvo, which will force Hanoi to make concessions to evade tariffs that could thwart its economic progress.
  • Fears of complicating relations with China have so far kept Vietnam from taking the action needed to adequately ease its growing trade imbalance with the United States, such as upping its arms purchases.
  • However, rising tensions in the South China Sea could provide an opening for Hanoi to take a stronger stance against Beijing after decades of delicately balancing between the two great powers.

For the past two decades, Vietnam has leveraged its strategic location as the gateway to Indochina to become one of the biggest success stories in the Asia-Pacific. This position has allowed it to largely remain neutral among great power competitions over the years, which continues to serve to its benefit today as now the top export "safe haven" from the U.S.-China trade war. This, however, has come at the cost of ramping up its trade deficit with the United States, which has threatened to retaliate should Hanoi not increase its purchases of American goods and services -- a warning the U.S. trade representative reiterated on July 29, noting the "host of unfair trade barriers" that U.S. businesses face upon entering the Vietnamese market. Desperate to avoid coming under the siege of a trade salvo, Vietnam has used every opportunity to remind Washington of its value as a foil to China. Such words, however, hold only...

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