Economic Observation: Trump'S Policy Of "Candy And Stick" To Vietnam Faces Test

It started with a phone call on January 24, 2025. The new Secretary of State Rubio of the United States called the Vietnamese Foreign Minister. On the surface, this call is to celebrate the 30th anniversary of the establishment of diplomatic relations between the two countries, but the real focus lies in two things: first, the United States is very dissatisfied with Vietnam's trade surplus; Second, the United States mentioned the South China Sea issue.

Say trade surplus. Vietnam's trade surplus with the United States has reached $100 billion, making it the fourth largest country in the world in terms of trade surplus with the United States. For Trump, this is a thorn. He has always believed that any country with a trade surplus with the United States is "taking advantage of the United States". As early as in his first term of office, Trump was ready to attack Vietnam, but later he concentrated his main firepower on China.

Let's talk about the South China Sea issue. The United States mentioned this issue not for Vietnam's interests, but for its own purposes. Trump wants to use the South China Sea issue to tie Vietnam to his chariot and confront China. This kind of "beating and pulling" method is very consistent with Trump's business style: a big stick and candy.

Trump's "dissatisfaction" with Vietnam has already shown signs. In 2024, the US government has launched a policy aimed at Vietnam and other countries, imposing tariffs of up to 271.2% on solar panels. This looks like a "warm-up" to pave the way for further large-scale tariff measures.

Vietnam's economy is highly dependent on exports, especially to the US market. Every year, 85% of Vietnam's economic income comes from foreign trade, and the United States is Vietnam's second largest trading partner. More importantly, most of Vietnam's foreign trade enterprises are factories set up by foreign investors. These factories chose Vietnam not because of its strong technology, but because of its low labor costs and preferential policies. If Trump really imposes tariffs, these factories may be transferred to other countries, and Vietnam's economic growth will also hit the brakes.

At the same time, the South China Sea issue mentioned by the United States has also made the situation more complicated. Vietnam has always been very tough on the South China Sea, and fighting for the interests of the South China Sea is the long-term goal of the Vietnamese government. The involvement of the United States in the South China Sea issue gave Vietnam an illusion that as long as it followed the United States closely, it would be able to take advantage of the South China Sea issue. But can Vietnam really achieve its goal?

The drama of the matter is that Trump's plan seems to pose a huge threat to Vietnam, but Vietnam is not completely without the capital to fight back. Although the United States is Vietnam's second largest trading partner, Vietnam's first largest trading partner is China. Vietnam's manufacturing industry chain, especially high-end parts production, relies heavily on China. Once the US tariff policy blocks Vietnam's exports, Vietnam may have to rely more on China's support.

More interestingly, the American abacus may not be able to achieve its goal. Many of the goods Vietnam exports to the United States are produced by Japanese, Korean and Chinese enterprises in Vietnam. If these enterprises find that Vietnam's policy environment is no longer friendly, they may directly choose to move to other countries, such as India or Indonesia. In this way, Vietnam may be hit hard, but the United States may not be able to profit from it.

On the South China Sea issue, Vietnam's calculation may not be successful. The so-called support of the United States is likely to be a verbal commitment, but it is difficult to deliver in practical action. Trump's policy has always focused on "the United States first". He cannot pay too much for Vietnam's interests.

The final result of the matter still needs time to test. But it is certain that Vietnam's economic environment has become more uncertain due to Trump's return. The tariff policy of the United States may make Vietnam lose its competitive advantage, and the risk of foreign capital withdrawal increases. On the South China Sea issue, Vietnam may try to take the opportunity to reap some benefits, but how far this road can go is still unknown.

For Trump, his strategy is to force Vietnam to obey through economic and trade issues, while using the South China Sea issue to draw Vietnam to confront China. However, whether the policy of "candy plus stick" will work depends on the response of Vietnam and China. At present, Vietnam does not want to completely turn to the United States or offend China. How to find a balance between the two major countries is the biggest challenge Vietnam will face in the next few years.

At a time when Trump is stirring up the world and Vietnam is carrying out large-scale government reform, this situation does not rule out unexpected chain reactions.

The Vietnamese government has just announced the trade situation in February. In that month, Vietnam had a rare monthly trade deficit of 1.55 billion US dollars. You know, in January, Vietnam had a trade surplus of more than 3 billion dollars. It is reported that this trade deficit in February is also the third since the beginning of 2023.

According to the Vietnamese side, the reason for this situation is related to the surge of imports in the current month, involving dairy products, automobiles and metal products. Correspondingly, Vietnam's exports did not grow so much. In combination, it is not surprising that Vietnam had a trade deficit in February.

Since China is Vietnam's largest source of imports, and the United States is Vietnam's largest export market, this situation is inevitably linked to China Vietnam trade and US Vietnam trade.

Data shows that in the first two months of 2025, Vietnam's trade deficit with China has expanded by nearly 37%, more than $15 billion. Vietnam has a trade surplus with the United States of America of 17 billion dollars, up 16.3% year on year. It can be seen that the general trend of both China Vietnam trade and the US Vietnam trade has not changed.

At the same time, considering that Vietnam's economy is export-oriented, the trade deficit in February may be a slightly subtle signal. In fact, the Vietnamese side seems to be aware of this problem, so it chose to cover the situation in February when releasing the data and combine the data of the first two months of this year.

In this way, Vietnam will have a trade surplus of nearly $1.5 billion. Vietnam also gave an explanation for this. They said that Vietnam's Lunar New Year holiday this year was in January, but last year's holiday was in February. Therefore, if you want to compare the data of this year and last year, you need to eliminate the impact of holidays by merging.

Objectively speaking, this reason is reasonable, but we can also see from it that Vietnam obviously does not want to get involved in the trade deficit. This actually reflects some of the conditions Vietnam is facing.

First, the possible impact of Trump's action on Vietnam, which is mainly divided into direct and indirect aspects. The former is whether Trump will directly engage in trade with the United States and Vietnam. Although Trump 2.0 has not directly targeted Vietnam from the current point of view, every word Trump said on tariffs and trade will obviously cause tension in Vietnam.

After all, no one can predict whether Trump's next goal will be himself. What's more, Trump recently announced at the joint session of the United States Congress that he would levy "equivalent tariffs" on the world from April 2.

The indirect impact is also not difficult to understand. Vietnam has long been a part of global trade. In addition to China and the United States, Vietnam's main trading partners include South Korea, ASEAN countries, etc. Even if Trump does not introduce targeted measures to Vietnam, once the global supply chain is impacted, Vietnam cannot be alone.

Vietnam's economy is highly dependent on exports. It can be said that as long as there are unstable factors in international trade, it is not what Vietnam wants to see, let alone large-scale shocks.

Second, Vietnam has just started large-scale government reform. With more and more government departments being merged and abolished and local reforms accelerating, the instability factors in Vietnam are increasing. You know, according to the Vietnamese government, they expect that the number of layoffs or early retirement arrangements may be as high as 100000. In addition to the complicated relationship, the chain reaction will not be small.

It is undeniable that the large-scale government reform in Vietnam has caused people's feelings to fluctuate in the country. Although there are supporters, there are also opponents. If the ideological problems are not handled well, they will not only hinder the reform process, but also may cause more destructive effects.

Against this background, Vietnam's trade deficit of more than one billion dollars in February is not good news for Vietnam. From the Vietnamese perspective, it is obviously more appropriate to take this matter into consideration or find a more positive perspective to explain it.

In fact, the reason why Vietnamese leaders are eager to promote reform is that they also have a sense of crisis. Objectively speaking, Vietnam's economic development momentum is really good. Last year's GDP growth exceeded 7%. At the same time, it should be noted that over dependence on exports is also the "lifeline" of Vietnam's economy. Against the background of Trump stirring up the global situation, this "lifeline" of Vietnam is more fragile than ever.

From this point of view, the Vietnamese senior management's initiative to change also has its own ideas.

On the whole, although Vietnam's trade deficit in February really needs their attention, whether this situation means deeper changes still needs time to give us an answer. At least in Vietnam's view, they have realized the risks and even crises that may occur later. Therefore, the next question is whether Vietnam can come up with strong response measures.

Trump's policy tends to impose global tariffs. Vietnam's trade surplus with the United States is second only to China, the European Union and Mexico. Trump once expressed concern about the trade deficit between the United States and Vietnam, and for a period of time listed Vietnam as a currency manipulator. Vietnam faces higher tariff pressure during Trump's second term of office.