NEW DELHI (AP) — As President Joe Biden is set to visit Vietnam on Sunday, the country is actively seeking to boost trade with the United States, highlighting the impact of the China competition on Asia’s relationships.
The question arises, how long can consumer spending keep stocks afloat?
Vietnam has recently designated the United States as a comprehensive strategic partner, a status previously granted to China and Russia. This move by Vietnam suggests its desire to diversify its international connections, as more US and European companies seek alternatives to Chinese factories.
During a fundraiser in Salt Lake City last month, President Biden noted that while Vietnam doesn’t want a defense alliance, they do want relationships that signal to China they have options and are not alone. The addition of Vietnam to his visit agenda underscores Biden’s focus on bringing more nations, like Vietnam and Cambodia, into America’s influence while China’s economy slows and President Xi Jinping consolidates political power.
Although US trade with Vietnam has grown significantly since 2019, its progress will be limited without improvements in infrastructure, workforce skills, and governance. Increased trade has not automatically propelled Vietnam’s economy on a consistent upwards trajectory.
US Commerce Secretary Gina Raimondo has reported that company CEOs view Vietnam as an attractive destination for diversifying supply chains, reducing dependency on China. Raimondo has been working to expand these supply chains through the Indo-Pacific Economic Framework, an initiative launched by President Biden.
Raimondo further explains, “Companies are truly considering countries like Vietnam, Malaysia, Indonesia, and India as lucrative business opportunities. However, these countries need to enhance their workforce, housing, infrastructure, and transparent government operations.”
Vietnam experienced a slip in economic growth during the first quarter of 2023. Exporters faced challenges such as higher costs and weakened demand due to global inflation impacting the consumer goods market. Nevertheless, US imports of Vietnamese goods have almost doubled since 2019, reaching $127 billion annually, as reported by the Census Bureau. However, it is unlikely that Vietnam, with a population of 100 million, can compete with the scale of Chinese manufacturing. In 2022, China, with its 1.4 billion population, exported four times more goods to the US than Vietnam.
Moreover, a recent analysis by the Peterson Institute of International Economics reveals that countries in the Indo-Pacific Economic Framework significantly rely on China for imports and exports. On average, over 30% of imports come from China, while nearly 20% of exports go to China. This dependence has risen considerably since 2010.
The White House national security adviser, Jake Sullivan, spotted an opportunity to strengthen the US-Vietnam relationship during the visit of Lê Hoài Trung, a top Vietnamese official, to Washington on June 29. After their discussions, Sullivan proposed, in a letter to the Vietnamese government, an elevation of their trade and diplomatic relations to the highest level.
Sullivan resumed the matter during his trip with President Biden to Helsinki on July 13, where he spoke on the phone with Nguyễn Phú Trọng, the general secretary of the Communist Party of Vietnam. Biden later announced the advancement to donors gathered in Maine, sharing his conversation with the Vietnamese head of state and asking for their thoughts on the matter.
Gregory Poling, director of the Southeast Asia Program and Asia Maritime Transparency Initiative, believes this change in status signifies Vietnam’s concerns about China’s assertive behavior. He stated that Vietnam’s decision to elevate the US relationship to the highest level is a significant move for a communist country sharing a border with China.
“For Vietnam, a communist state with a rigid Leninist hierarchy in diplomatic relations, these changes are of utmost importance,” Poling emphasized.
In summary, President Biden’s visit to Vietnam underscores the evolving dynamics in Asia as countries like Vietnam seek to strengthen trade ties with the United States amid growing competition with China. While there are limitations to Vietnam’s progress, it is evident that alternative options to China are being seriously considered by companies worldwide.
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