Vietnam's Tightrope Walk Between the US and China: A Misstep?

When Vietnam's Ministry of Industry and Trade announced last year the construction of a 417-kilometer railway connecting to China, who could have imagined that just half a year later, it would turn around and sign a trade agreement with the US aimed at countering China?

This agreement, announced by Trump on July 2nd, superficially seems to be Vietnam offering "zero tariffs" in exchange for a 20% basic tax rate from the US. But upon closer inspection, the terms are all devastating blows: if Chinese goods enter the US through Vietnam, their tariffs would jump directly to 40%; Vietnam would also have to pay for building an "China transshipment monitoring system" for the US, even allowing Americans to inspect factory electricity meter readings. What kind of trade agreement is this? It's clearly a "letter of submission".

Vietnam wasn't without struggle. When the US waved a 46% tariff stick in April, it tried to propose a "dual zero tariff" plan, even using the $1.5 billion golf project of Trump Group in Vietnam as a bargaining chip. However, when Samsung suspended its expansion and the stock market fell by 8.1% in two days, the Vietnamese economy had its lifeline choked, leaving it no choice but to bow down — after all, the US trade surplus with Vietnam was $123 billion, accounting for a third of its exports. This figure is enough to make any tough stance turn into compromise.

But the cost of compromise is self-inflicted damage. 80% of plastic raw materials rely on China, and 60% of mobile phone components are imported from China. Now, by cooperating with the US to "de-Chinize", it's equivalent to tearing apart its own industrial chain. More ironically, Vietnam had just imposed a 97% anti-dumping tax on Chinese wind power equipment three months ago, yet now it's fully opening up its agricultural and automotive markets to the US. Local companies are likely to be swept away.

China's reaction has been calm yet powerful. The Foreign Ministry stated, "The agreement should not harm the interests of a third party," while the Ministry of Commerce added, "opposing transactions that sacrifice China's interests." The words are not heavy, but everyone can sense the underlying message: want to be an accomplice? Then face the consequences.

This calmness is backed by solid strength. The proportion of exports to the US has dropped from 20% to 13%, and car exports to ASEAN increased by 120% in the first quarter. New energy vehicles, lithium batteries, and photovoltaic components have become the main pillars; domestic interest rates and deposit reserves have been cut, and a 3 trillion yuan national debt has entered the market to support domestic demand. While Vietnam sacrifices its industrial sovereignty to protect short-term exports, China has already escaped the trap of "US dependence".

Vietnam's dilemma is the reality of a small country's survival, but the stakes of taking sides are too high. It may have forgotten: the railway connected to China hasn't started yet, but once the supply chain tracks are dismantled, it will be difficult to reconnect them again.

(Information sourced from CCTV News, NetEase News, Sohu Finance, etc.)

Original article: https://www.toutiao.com/article/1836685514097754/

Statement: This article represents the views of the author.