The United States’ new tariffs have had a negative impact on the global economy, Vietnam’s prime minister said yesterday, as Vietnamese and U.S. officials continue to hash out a potential trade agreement.
Vietnam was hit particularly hard in the suite of “reciprocal tariffs” announced by President Donald Trump in early April; it was slapped with a 46 percent levy on its imports to the U.S., among the highest rates in the world.
Addressing Vietnam’s National Assembly yesterday, Pham Minh Chinh said that even though the tariffs have been delayed until July, they were threatening to unpick global supply chains, presenting Vietnam’s export-reliant economy with a “challenging and complicated situation,” Reuters reported.
Chinh said that Vietnam has made good progress in talks with the Trump administration over the tariffs, which began on April 23 with a call between Trade Minister Nguyen Hong Dien and U.S. Trade Representative Jamieson Greer. A Vietnamese delegation was scheduled to arrive in Washington on May 1.
“We have stayed calm and courageous and taken several appropriate measures,” Chinh said. “Vietnam is among the first countries the U.S. has agreed to hold tariff negotiations with.”
Chinh’s comments hint at the threat that the U.S. tariffs pose to Vietnam’s export-reliant model of economic growth. The U.S. is the main destination for Vietnamese goods, with its goods exports to the United States last year accounting for 29 percent of its total and a whopping 30 percent of its gross domestic product. However, this has led to the quick accretion of a massive trade surplus with the U.S., which grew from $38.3 billion in 2017 to $123.5 billion last year, making it the third-largest U.S. trade deficit in the world, behind the deficits with China and Mexico.
Even before Trump’s tariff announcement, Vietnamese officials, recognizing that the trade deficit would be an issue for the administration, had vowed to purchase more American goods such as liquefied natural gas and aircraft. After the announcement, they wasted little time in offering to remove all tariffs on U.S. imports. Vietnam has since also pledged to clamp down on the fraudulent transshipment of Chinese goods via its territory, which Trump and his economic team believe has helped pump up the trade deficit.
In return, Vietnam’s negotiators have been instructed by Chinh to request early recognition of Vietnam as a market economy – which the U.S. government declined to do last August after a lengthy review – and the removal of restrictions on high-tech exports, which will help reduce the large trade surplus with the United States.
Chinh’s comments came as officials from the Association of Southeast Asian Nations (ASEAN) joined counterparts from Japan, China, and South Korea in warning about the economic impact of a possible trade war. In a joint statement issued on the sidelines of the annual Asian Development Bank meeting in Milan, Italy, finance ministers and central bank governors stated that spiking tariffs threaten to create rifts in the global economy.
“Escalating trade protectionism weighs on global trade, leading to economic fragmentation, affecting trade, investment, and capital flows across the region,” the officials said, as per Nikkei Asia. “We call for enhanced regional unity and cooperation as we endeavor to weather the heightened uncertainty.”