Trump Should View Vietnam As a Trade Partner, Not a Target

Donald Trump was sworn in as U.S. president on Monday, and the world is speculating about his plans for day one and beyond. For Asia -- especially Vietnam -- the key concern centers on foreign trade and tariffs. Will Trump's trade measures target all nations, or focus on specific countries like China and Vietnam, the latter having emerged as a major beneficiary of supply chain shifts in Southeast Asia.Under a scenario in which Trump spares the rest of the world and imposes tariffs only on China, it will be negative for Chinese exports and the impact on China's gross domestic product will depend on the level of the tariff increase. Given that export exposure was 2.8% of GDP in 2023 -- a 0.7% decline since 2017 -- the fallout for the Chinese economy will be negative but manageable and will likely lead Beijing to take measures to mitigate the fallout.In Southeast Asia, the Indonesian export sector will be most affected given its exposure to China, where 23.5% of its overseas shipments went in 2023 (up from 13.7% in 2017), as well as indirectly via commodities. Vietnam will be a big winner, along with Malaysia, Thailand and Singapore.From 2017 to 2023, Vietnam increased its export share to the U.S. in all product categories, making it the bigger winner in emerging Asia. India has also gained in export market share to the U.S., but to a much lesser extent due to a less favorable investment environment and less emphasis by the government on manufacturing.Currently, despite diversifying, the items most reliant on China in the U.S. are baby carriages, toys, games and sporting goods which have 74% dependency. These items will be prime for further diversification to the rest of Asia. The U.S. remains very exposed to China for telecommunications and sound recording apparatus -- the highest value import sector from China. Vietnam gained 11% of U.S. market share in this category, now making up 15% of total U.S. imports, up from 4% in 2017. A similar story is repeated for all product categories but for a much less impressive gain in market share.