Vietnam in firing line on trade

President Trump has repeatedly identified Vietnamese competition as a threat to American workers. Photo courtesy Reuters

Vietnam is facing the threat of possible trade retaliation from the United States following President Trump’s order of a thorough review of the giant US trade deficit.

Vietnam last year ran a $32 billion trade surplus with the United States, and was repeatedly identified by Mr Trump on the campaign trail as a threat to American workers.

The president signed an executive order on Friday directing US trade officials to conduct a detailed country by country review of the reasons for the deficit.

“They’re cheaters. From now on, those who break the rules will face the consequences and they’ll be very severe consequences,” he said.

Vietnam will be a high priority for such an investigation, as it runs one of the largest trade surpluses with the United States, behind only China, Japan, Germany, Mexico and Ireland.

“The jobs and wealth have been stripped from our country. We’re bringing manufacturing and jobs back,” said Mr Trump in a sign that he is getting serious on one of his key campaign promises.

His meeting this week with the Chinese president, Xi Jinping, will be followed closely in Hanoi for clues as to how he intends to address trade, and his broader posture towards Asia.

China’s trade surplus with the United States is by far the largest, ten times the size of Vietnam’s, and Mr Trump has repeatedly threatened retaliation against Beijing.

Turning away from free trade

One option is for the US to raise tariff barriers and impose anti-dumping penalties on countries and sectors it judges to be using unfair trade practices.

Administration officials have brushed aside the assessment of many economists that the trade imbalance is due to structural factors rather than “cheating”.

Germany has expressed alarm that the executive orders are a sign that the United States is already turning away from free trade.

Vietnam has already been hit by the new administration’s scrapping of the TPP, a trade deal which gave Vietnamese exporters even better access to the US market, and was seen as a major potential driver of economic growth.

The Vietnamese president, Tran Dai Quang, revealed on Friday that he had received a letter from President Trump calling for more economic and diplomatic cooperation between the two countries.

The belated news of the letter, a month after it was received, was revealed in a meeting between Mr Quang and the American ambassador, Ted Osius.

The contents of the letter, however, as announced by the Vietnamese side, were vague and appear to contain little of substance.

Unwelcome reminder

The leaders in Hanoi were stung last week by the US State Department’s honouring of a prominent Vietnamese blogger, Nguyen Ngoc Nhu Quynh (known as Me Nam or Mother Mushroom), who has been detained on political charges since last October.

The ceremony was an unwelcome reminder that elements in the US political system intend to keep harrying them over human rights abuses.

Vietnam has indicated that it is anxious for closer contacts with the new administration, aware that it has been relegated to a secondary concern in the White House.

President Trump’s Asia focus, for now, remains firmly directed at the trade deficit, broader relations with China, and the threat from North Korea.