Vietnam and the Tariff Shock
The biggest loser of the tariffs, the tragedy of the "miracle on the Mekong": Vietnam 🇻🇳
When President Trump revealed the list of tariffs on "Liberation Day", one country stood out: Vietnam. They were hit by 46% tariffs, the second highest out of all of them. But to really understand the scale of this mistake here, you have to walk back in Vietnamese history.
Vietnam was destroyed after its war with the United States. It was run as a socialist nation for a decade, with strict agricultural collectivization and no free market trade. This led, predictably, to mass famine and slow growth. It seemed that there was no hope left for this country. The Soviet Union was their only lifeline, and the economic support from them dried up within only a few years.
Then, in 1986, as the Soviet Union was on the verge of collapse, the Vietnamese government passed the Đổi Mới reforms. They made sweeping changes to the organization of the economy, allowing private enterprise. Vietnam opened itself up to the world, encouraging foreign direct investment and trade with the West.
The success of these reforms led Vietnam to grow its GDP at a rate of 4-6% in the 1990s. Vietnam's socialist policies led them to redistribute these gains across the nation, leading to massive reductions in poverty. Today, Vietnam is akin to a middle-income nation like Mexico or Turkey, a far cry from its war-ravaged, famine-stricken past.
Despite the trauma of war, Vietnam has significantly warmed its relationships with the U.S. in the past decades. Indeed, they are far friendlier to us than they are to China. The U.S. has taken advantage of this and shifted much of our manufacturing from China to Vietnam, reducing our dependence on China.
This would seem like a win-win scenario. Not according to Trump. He saw our close trade relationship with Vietnam as a threat to American manufacturing, and slapped them with massive tariffs as a result. All of those years of careful diplomacy and relationship strengthening between the two countries are circling the drain.
Although the tariffs have been paused, nobody is sure what will happen next. Vietnam is in talks with China and have already agreed to some cooperation agreements. [1] This can only be bad news for the U.S.
I visited Vietnam last year. It's a beautiful nation, with delicious food, warm people, and a fascinating culture. On the flight there and leaving, they played a beautiful song called "Hello, Vietnam" on the speakers [2]. It's sung by a child of Vietnamese expats, who wishes to see the country where she originated. It's an anthem for Vietnamese immigrants, and paints a beautiful picture of Vietnam from a Western perspective.
Unfortunately, it seems like the U.S. has decided to say "Goodbye, Vietnam".