In a year that the United States and Vietnam will celebrate the 30th anniversary of diplomatic normalization, U.S. President Donald Trump poured cold water on the relationship by slapping a 46 percent “reciprocal tariff” on Vietnamese exports to the United States. The imposition of tariffs came after many Vietnamese efforts to engage with the Trump administration on the issue of trade, including unilaterally lowering tariffs on U.S. imports and granting Elon Musk’s Starlink permission to operate in Vietnam. It also came after the Joe Biden administration refused to lift Vietnam’s “Non-Market Economy” status last August.
The Vietnamese government’s reactions were swift. It requested that Washington delay the imposition of tariffs for at least 45 days (they come into effect on April 9) and sent Deputy Prime Minister Ho Duc Phoc to the United States to negotiate the tariffs. To Lam, the general secretary of the Communist Party of Vietnam (CPV), was the first foreign leader to hold a phone conversation with Trump, and proposed reducing U.S. products to zero and buying more U.S. products in exchange for tariff relief. Vietnam also communicated publicly that the U.S. and Vietnamese economies were complementary, not competitive. Foreign Minister Bui Thanh Son met with U.S. Ambassador to Vietnam Marc Knapper to emphasize that the U.S. tariffs would affect millions of Vietnamese workers, and that they were not consistent with the spirit of the U.S.-Vietnam Comprehensive Strategic Partnership.
With Trump’s tariffs, the U.S.-Vietnam relationship has encountered its biggest challenge in years. Vietnam has consistently been one of the most U.S.-friendly countries in the Indo-Pacific, and many Vietnamese are fond of Trump for his anti-China credentials. The Vietnamese government also thought it was on Trump’s good side, considering he did not put tariffs on Vietnam during his first term and even elevated Vietnam’s international profile by meeting North Korean Chairman Kim Jong-un in Hanoi. It is understandable that Vietnam was shocked and disappointed by the U.S. tariffs, and the government admitted that it should diversify its foreign markets via free trade agreements with other countries. With Chinese President Xi Jinping’s visit to Vietnam looming, there are concerns that the U.S. move will push Vietnam closer to China.
Without a doubt, Trump’s tariffs undermine the U.S. initiative to shift the military focus to the Indo-Pacific away from Europe and constitute a geopolitical own goal in its competition with China, as Asian countries shoulder far more tariff increases than European countries. However, it would be an exaggeration to claim that Vietnam will lean closer to China because of the tariffs. Although economic growth and trade relations are important to Vietnam, the country has built its foreign policy on its own security interests, the most important of which is to maintain balanced relations among the major powers. Economic growth and trade relations are intended to supplement, not replace Vietnam’s calculations of its own security interest.
This is not the first time Vietnam has had to deal with an economic shock brought about by its major partners. Shortly after unification, Vietnam affirmed its neutrality in the Sino-Soviet Split and pledged to establish diplomatic relations with countries of different political systems. Vietnam’s ability to adopt a multilateral foreign policy then was the result of its ability to resolve the continental security threat after defeating South Vietnam in 1975, and its confidence in the trajectory of the communist movement as revolutions also succeeded in Laos and Cambodia. Vietnam shifted from defending to building the socialist fatherland.
But building proved to be a task no less daunting than defending. Vietnam had a massive need for capital to rebuild its war-torn economy, industrialize an agrarian society, and unify the northern and southern economies. The CPV estimated that Vietnam would need approximately $13 billion to carry out its Second Five-Year Plan (1976-1980). Vietnamese leaders turned to the Soviet Union and China for economic assistance. However, both Soviet and Chinese offers significantly came short of Vietnam’s $13 billion figure because they no longer saw a need to continue a wartime volume of aid to post-war Vietnam. Even worse for Hanoi, in January 1976, Moscow was making its economic assistance dependent on Hanoi’s willingness to side with it in its rivalry with China. Vietnam rejected the Soviet demand because it did not want to upset China. Moscow swiftly retaliated by holding up its aid, which forced Hanoi to voice its upset.
Instead of conceding to Soviet pressure, Hanoi doubled down on its neutral and multilateral foreign policy in an attempt to diversify itself away from the communist bloc. Vietnam refused to join the Soviet-led Council for Mutual Economic Assistance (COMECON). It expanded economic relations with capitalist and Southeast Asian countries as well as began to discuss normalization of relations with the Jimmy Carter administration. Only after the Khmer Rouge launched a massive attack against Vietnam in April 1977 did Vietnam rethink its foreign policy to protect itself. In the hopes of accelerating diplomatic normalization with the United States, Vietnam dropped its demand for $3 billion worth of war reparations, but Washington was now firmly siding with China against the Soviet Union, and hence, Vietnam abandoned the normalization talks.
Hanoi had few options besides relying on the Soviet Union for security. It joined COMECON in June 1978 and signed an alliance treaty with Moscow in November. By doing so, Vietnam essentially prioritized its security over the economic goals of the Second Five-Year Plan. Throughout the 1980s, Vietnam was willing to endure economic sanctions from the West, China, and ASEAN and to tolerate economic dependence on the Soviet Union in service of its occupation of Cambodia and its deterrence of China. Only after Vietnam withdrew its military from Cambodia and normalized ties with China in 1991 did its FDI growth speed up. This FDI growth occurred as Vietnam began adopting a post-Cold War multilateral foreign policy. It was Vietnam’s security interest, not economic interest, that dictated the trajectory of its foreign policy from neutrality to a pro-Soviet position and then back to neutrality at the end of the Cold War.
Hence, Vietnam will not change its neutral and multilateral foreign policy just because of the U.S. tariffs, regardless of how economically damaging they might be, because Vietnam is not facing any threats as severe to its security as the China-Khmer Rouge alliance was in the 1970s. The United States cannot expect Vietnam to buy more U.S. big arms to correct the trade imbalance because Hanoi is afraid that doing so will raise Chinese concerns about Vietnamese intentions. Vietnam should recognize that Trump has increased tariffs on all countries running trade deficits with the United States, suggesting it will be difficult to navigate the tariffs from a purely mathematical perspective. Washington cannot use tariffs to force Vietnam to pick a side in the U.S.-China rivalry if it knows that even the Soviet Union could not force Hanoi to do so. And to be fair, Trump still slapped tariffs on allies that buy lots of U.S. weapons, so there is no guarantee that siding with Washington would spare Vietnam economic pains.
Vietnam is reasonably adopting the same playbook as it did in 1976 and 1977 – doubling down on its multilateral foreign policy in order to minimize the negative impact of economic punishment from its major partners. Prime Minister Pham Minh Chinh emphasized how the country’s multilateral foreign policy can turn this challenge into opportunity by allowing Vietnam to diversify “products, markets, and supply chains.” Xi’s visit to Vietnam. with its potential promise of expanded economic cooperation, could help Hanoi minimize the impact of Trump’s tariffs. However, Vietnam will still look to preserve good relations with the United States to maintain access to the U.S. market regardless of how limited such access will be, and hence, will not side with China against the United States. This explains why Vietnam was quick to reach out to the United States and attempt to negotiate a tariff reduction, despite many signals from the Trump administration that the tariffs are here to stay. Vietnam’s multilateral foreign policy guides its economic response to the tariffs, not vice versa.
The $123.5 billion trade imbalance between Vietnam and the United States will take Vietnam, a country with a GDP of $500 billion, a long time to correct. This only exposes Hanoi to Trump’s accusation of it being a cheater, even if there is a deal to reduce the U.S. tariffs in the coming months. Hanoi must reassess how important it really is in the U.S. Indo-Pacific policy to avoid overplaying the geopolitical card. Trump’s slapping of 46 percent tariffs on Vietnam, far more than other U.S. Asian partners, suggests that Vietnam is dispensable. It is not hard to understand why other Southeast Asian countries increasingly see Washington as a “landlord seeking rent” instead of a credible partner. And if Vietnam ever decides to side with the United States against China to avoid tariffs, Chinese punishments could easily outweigh any security and economic benefits the United States might offer.
