With both Donald Trump and sitting president Joe Biden having served in the White House, we have unique insight into how a second presidential term for either candidate could shape the future of US-Vietnam relations.
The 2024 US presidential election is poised to exert a critical influence not only on domestic policies but also on America’s international relationships, particularly with strategic partners like Vietnam. As the largest export market for Vietnam and a crucial ally in the Indo-Pacific region, the United States holds a pivotal role in shaping bilateral trade, investment, and cooperation agendas.
The election outcome will profoundly impact these dynamics, determining future policies on tariffs, trade agreements, and broader economic initiatives between the two nations. Stakeholders and businesses on both sides are closely watching how candidates’ foreign policy platforms will shape the future of US-Vietnam relations and their implications for global economic landscapes.
With both candidates having previously served a term in office, we have unique insight into how a second term for either candidate could shape the course of future US-Vietnam relations. We look at how US-Vietnam relations developed under the respective Trump and Biden administrations and discuss how the different outcomes of the 2024 US presidential election could shape future trade, investment, diplomacy, and defense cooperation.
Trade and investment relations: Trump and Biden report card
Trade relations under Trump
During his term in office, Trump reversed much of the progress on US-Vietnam trade relations made by his predecessor.
One such move was his decision in 2017 to pull out of the Trans-Pacific Partnership (TPP) agreement negotiations, a key policy position of the previous Obama administration. The TPP, which consisted of 12 Pacific countries, including the US and Vietnam, would have helped to expand bilateral trade significantly by removing technical barriers to trade and reducing tariffs.
Trump’s decision to pull out of the TPP had ramifications that last until today. The TPP eventually evolved into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) without the US’s involvement, in the process decreasing the total GDP of members to US$10.1 trillion (without the US) from a potential US$28.7 trillion (with the US).
Moreover, by withdrawing from the negotiations (as well as other actions against free trade), Trump cemented an anti-globalist and anti-free trade sentiment within the US Congress, which has made it difficult for subsequent administrations to consider joining. Despite widespread support for the US’s accession by current members, the Biden administration has refrained from reentering negotiations, instead pursuing its own Indo-Pacific Economic Framework (IPEF).
Section 301 investigations
During Trump’s term, his trade policy was heavily focused on scrutinizing the US foreign trade deficit. While his primary target was China, he also took aim at Vietnam, with which the US had a trade deficit of over US$38 billion in 2017. This deficit expanded to almost US$70 billion by the end of his term, and to US$104 billion in 2023.
In October 2020, the US Trade Representative (USTR) launched two Section 301 investigations into Vietnam, one into whether Vietnam was undervaluing its currency and one related to Vietnam’s import and use of timber. Section 301 of the Trade Act of 1974 is the legislation under which the USTR can investigate alleged trade violations of foreign governments, and the section under which it imposed tariffs on over US$500 billion worth of Chinese goods in 2018 and 2019.
In a report released on January 15, 2021, the USTR concluded that Vietnam was undervaluing its currency to achieve an economic advantage and that these actions contributed to a trade imbalance with the US and other countries. As a result, the US listed Vietnam as a currency manipulator.
While the report found that Vietnam’s behavior was “actionable” under Section 301, the USTR also said in a statement on January 19, Trump’s last day in office, that it would not take any actions in relation to the findings.
Trade relations under Biden
The Biden administration has taken a considerably different approach to trade with Vietnam during his term, taking steps to expand trade and investment ties between the two countries. Total trade between Vietnam and the US has steadily grown during Biden’s term in office, increasing from around US$113 billion in 2021 to US$124.3 billion in 2023.
During Biden’s first year in office, the USTR quickly resolved the disputes raised in the Section 301 investigations. In April 2021, it said there was “insufficient evidence” to classify Vietnam as a currency manipulator. In July 2021, it announced that no action would be taken against Vietnam, as a “satisfactory” agreement had been reached between the US Treasury Department and the State Bank of Vietnam. However, it also stated that it would continue to monitor Vietnam’s implementation of its commitments going forward.
Further, in October 2021, the USTR stated that it had reached an agreement with Vietnam to address concerns over the export of timber to the US that had been harvested illegally to the detriment of the environment. As a result of this agreement, the USTR determined that no trade action against Vietnam was warranted.
Biden has not launched any further investigations or sought any trade disputes with Vietnam during his term. The USTR also continues to leave Vietnam off the list of currency manipulators.
Nonetheless, due in part to the unpopularity of the agreement within the US Congress, Biden has not pursued accession to the CPTPP. This would be one of the most significant ways in which the US could expand trade with Vietnam.
Notwithstanding, Biden has pursued his own trade deal with Asia Pacific nations, the IPEF. Launched in May 2022, the IPEF includes 14 founding members in the Indo-Pacific region, including Vietnam, which together cover 40 percent of the world’s GDP. The IPEF seeks to develop trade between the member nations through measures such as facilitating the provision of trade licenses, reducing customs red tape, and improving regulatory transparency in the region. In particular, the IPEF seeks to expand trade in agricultural products, of which the US is a major exporter.
However, unlike the CPTPP, the IPEF currently does not propose reducing or eliminating tariffs.
In September 2023, following a state visit by Biden to Hanoi, the US and Vietnam officially elevated bilateral relations to a Comprehensive Strategic Partnership (CSP), pledging among other things to further open up each other’s markets to trade and investment.
In October 2023, the US Department of Commerce (DOC) initiated a review of Vietnam’s economic status as a non-market economy (NME), in response to a request from the Vietnamese government to upgrade it to a “market-based economy”. Per US law, an NME is defined as any foreign country that the DOC determines does not adhere to market principles regarding cost or prices, leading to the sale of goods within that country failing to reflect their fair value. NMEs are subject to certain antidumping and countervailing duties.
If the review, which will conclude in July 2024, finds that Vietnam can now be considered a market-based economy, it would significantly ease exports from Vietnam to the US. However, it is still unclear what the conclusion will be, given the varying interests between different stakeholders on the matter.
Investment and business cooperation under Trump
During Trump’s tenure, US investment in Vietnam grew steadily. According to the Bureau of Economic Analysis (BEA), the US direct investment position in Vietnam grew from US$2.46 billion in 2017 to US$2.53 billion in 2020. The highest level it reached during Trump’s term was US$2.9 billion in 2018.
Meanwhile, the total assets of majority-owned foreign affiliates of US multinational enterprises (MNEs) in Vietnam grew from US$13 billion in 2017 to US$18.9 billion in 2021 (although it fell to just US$12.8 billion in 2020 due to the impact of the pandemic). The number of employees of US MNE affiliates in Vietnam also grew from 54,700 in 2017 to 75,700 in 2021.
The Trump administration placed a strong emphasis on energy cooperation. In 2019, the US and Vietnam signed a Memorandum of Understanding (MoU), establishing a comprehensive energy cooperation partnership to facilitate cooperation on energy markets. Trump also heavily pushed for Vietnam to increase imports of American liquified natural gas (LNG) as a means of balancing the trade deficit and encouraged US energy companies to expand in the Vietnamese market. Vietnam’s fast-growing economy is still heavily reliant on LNG and other fossil fuels, despite efforts to green its economy.
Following the signing of the MoU, Prime Minister Nguyen Xuan Phuc agreed to assign US utility company AES Corporation to be the major investor in the US$5 billion Son My II Gas Power Plant in the southeastern province of Binh Thuan under a build-operate-transfer (BOT) contract. The plant will reportedly be required to import nearly US$2 billion worth of LNG from the US each year.
Other US energy companies such as ExxonMobil have also explored opportunities in Vietnam’s energy sector, including investing in LNG-to-power projects.
Investment and business cooperation under Biden
US investment in Vietnam has increased further in the years since Biden took office, with the US’s total direct investment position in the country reaching US$3.5 billion in 2022.
Biden has actively sought to promote business cooperation and investment with Vietnam and the wider Pacific region during his term, in areas such as clean energy, high-end technology (in particular semiconductors), and digital industries.
One of the pillars of the IPEF is the Fair Economy Agreement, which aims to create a more “transparent and predictable” trade and investment environment by preventing and combatting financial crime, improving tax administration and transparency, and increasing cooperation and information sharing on these issues.
Meanwhile, the US-Vietnam CSP aims to foster robust investment and business collaboration between the two nations, with a particular emphasis on advancing science, technology, innovation, and digital infrastructure. A cornerstone of this partnership is the development of Vietnam’s semiconductor industry, recognized for its potential to enhance global supply chains.
The Biden administration’s commitment to supporting Vietnam in this endeavor includes substantial initiatives funded through the International Technology Security and Innovation Fund (ITSI Fund), part of the CHIPS Act. Some of these funds, amounting to US$500 million over five years, will aid in fortifying Vietnam’s semiconductor ecosystem, regulatory framework, and workforce development. It has also set aside an initial seed funding of US$2 million to establish teaching labs and training courses focused on semiconductor assembly, testing, and packaging (ATP) in Vietnam, crucial for skill development in this sector.
Furthermore, the CSP envisions comprehensive cooperation in promoting secure and reliable digital infrastructure across Vietnam, which is poised to catalyze opportunities for digital capability enhancement and foster growth in the country’s digital economy. Per the CSP White House fact sheet, initiatives include exploring the establishment of an Open Radio Access Network (O-RAN) training lab and ensuring the adoption of emerging technologies. These efforts underscore a shared commitment to advancing innovation and entrepreneurship, paving the way for sustained collaboration between US and Vietnamese industries in critical and emerging technologies.
2. US-Vietnam trade relations under a future Trump and Biden presidency
Under a second Trump term
A second Trump term could have significant implications for US-Vietnam trade relations. Given his anti-globalist stance and ongoing criticism of trade deficits, the prospects for a new Free Trade Agreement (FTA) with Vietnam appear slim. Trump’s consistent emphasis on reducing trade deficits suggests his administration could reopen Section 301 investigations into Vietnamese goods or trade practices. Given that the trade deficit with Vietnam has continued to grow since his previous term in office, the Trump administration might perceive renewed investigations as a necessary measure to address this issue.
Furthermore, Trump has proposed a universal baseline tariff of 10 percent on most imported foreign goods as part of his 2024 campaign. This policy aims to protect American industries and address unfair trading practices, including currency manipulation. While this tariff would not specifically target Vietnam, Vietnamese exporters are particularly vulnerable to the potential impact of such a policy, as the US is Vietnam’s largest export market and a major exporter of the types of goods that are likely to be targeted for additional tariffs. With Vietnam previously labeled a currency manipulator by the first Trump administration, it is likely to be a prime candidate for additional tariffs under a counter-currency manipulation mechanism proposed as part of his trade policy if he wins a second term.
A potential consequence of an increasingly protectionist US under Trump could be that Vietnam seeks to further strengthen its trade relations with China. This shift could involve deeper economic cooperation and increased trade volumes to compensate for potential losses in the US market. However, Vietnam would need to navigate its complex geopolitical relationship with China, balancing economic benefits with national security concerns.
Under a second Biden term
A second Biden term is likely to see continued efforts to improve bilateral trade relations between the US and Vietnam, a crucial part of Biden’s commitment to fostering stronger economic ties with the wider Indo-Pacific region. This is evident from the Biden administration’s continued commitment to advancing the IPEF, as well as continued collaboration with the Vietnamese government to enhance trade relations. Under a second term, this partnership could include further efforts to streamline trade processes, improve supply chain connectivity, and enhance regulatory frameworks to facilitate smoother trade flows.
However, Biden’s reluctance to consider CPTPP membership or a bilateral FTA with Vietnam suggests that progress could be limited. Such steps would lead to significant tariff reductions, but their absence suggests that the Biden administration is focusing on other avenues to strengthen trade without fully committing to these broader or bilateral trade deals.
Moreover, there are underlying uncertainties primarily linked to the complex dynamics of US-China trade relations. Evidence suggests that some Chinese exporters are circumventing US tariffs by routing goods through Vietnam. World Bank data and economic analysts have noted a correlation between increased Vietnamese imports from China and subsequent exports from Vietnam to the US. This trend could pose a challenge for Vietnam if the Biden administration intensifies efforts to prevent such tariff circumvention. Given that Biden has expanded tariffs on Chinese goods during his term, a second term could see an escalation of US-China trade tensions, potentially leading to more stringent measures to address these circumvention practices.
If the US imposes stricter controls on imports from third countries suspected of acting as conduits for Chinese goods, Vietnam’s exports could be caught in the crosshairs. This would not only impact Vietnam’s export economy but also strain the US-Vietnam trade relationship.
3. Diplomacy and defense relations: Trump and Biden report card
Diplomacy and defense under Trump
Despite Trump’s critical stance on global trade and his isolationist attitude, he and his administration continued to regard Vietnam as an important partner to the US in the Pacific region.
His term saw several high-profile diplomatic engagements between US and Vietnamese officials, with Trump himself visiting Vietnam in November 2017, after attending the APEC Summit Week. The US Secretary of Defense under Trump, James Mattis, made two visits to Hanoi in 2018, to further develop bilateral military ties. On his first visit, Mattis called the US and Vietnam “like-minded partners”, stating that they “share values based on mutual respect and common interests, including freedom of navigation, respect for international law, and recognition of national sovereignty.”
US-Vietnam defense relations in recent decades have been shaped in large part by the legacy of the Vietnamese War, in particular war remediation. The Trump administration oversaw the continuation of these efforts. In early 2018, USAID signed agreements with Vietnam’s Ministry of National Defense for a five-year US$183 million dioxin (a component of Agent Orange) cleanup project at the Bien Hoa Airbase near Ho Chih Minh City.
The other core aspect of the US and Vietnam’s defense collaboration is the joint perceived threat of China. China and Vietnam share overlapping territorial claims in the South China Sea, which has led to a decades-long dispute involving intermittent military posturing and disruption of each other’s operations in the region.
Vietnam’s dispute with China dovetails with the US’s broader security concerns and desire to contain Chinese influence in the Indo-Pacific region. This shared strategic interest has led to increased defense ties, with Vietnam seeking to modernize its military capabilities. The US has become a key partner in this effort, providing Vietnam with defense equipment and training, which is seen as a counterbalance to China’s growing influence.
Trump built upon the progress made by predecessors to increase US influence in the Indo-Pacific. At the end of 2017, his administration launched the “Free and Open Indo-Pacific” initiative, adopting various concepts from Obama’s “Rebalance to Asia and the Pacific” strategy. The initiative formed part of Trump’s National Security Strategy (NSS), which classified Vietnam as a “growing security and economic partner”.
The US made several arms transfers to Vietnam during Trump’s term in office. According to the US Department of Defense (DOD), between 2016 and 2021, the US authorized the permanent export of US$29.8 million in defense articles to Vietnam. In 2018, the US provided US$81.5 million in foreign military financing to “support the Indo-Pacific Strategy”.
Diplomacy and defense under Biden
US-Vietnam defense relations continued to see healthy development after Biden took office in late January 2021, aided by his more globalist worldview and softer stance on Vietnam trade. US military support to Vietnam enjoyed continuity, with the country receiving a total of US$104 billion in State Department-funded security assistance under the Foreign Military Financing program between 2017 and 2023.
In September 2023, the Biden administration was in talks to conclude an arms deal with Vietnam, reportedly one of the largest in history between ex-Cold War adversaries. While the deal has not yet come to fruition, it suggests that the Biden administration is keen to advance military cooperation with Vietnam
The US-Vietnam CSP signed in September 2023 also included commitments to advance cooperation on security and defense, including further cooperation in defense trade. The US also stated that it is “committed to continuing to assist Vietnam to develop its self-reliant defense capabilities”, signaling continued military support.
It is important to note that despite shared goals in the South China Sea, Vietnam maintains a policy of strategic non-alignment. While it has engaged in defense cooperation, it has not formed formal military alliances, reflecting its complex relationship with China, which includes deep economic ties and a shared border.
Further, Vietnam has also increasingly relied on arms purchases from Russia, angering the US. Vietnam has historically relied on Russia for arms supplies but has sought to reduce this reliance in recent years. However, Vietnam has continued to purchase arms from Russia, due to their lower cost than US arms and the fact that US supplies may not be compatible with its existing Russian systems.
This reliance on Russian arms may put Vietnam at risk of violating US sanctions. Under the Countering America’s Adversaries Through Sanctions Act (CAATSA), which was enacted in 2017, countries that engage in significant transactions with Russia’s defense or intelligence sectors could face US sanctions. This has placed Vietnam in a challenging position, as it seeks to modernize its military while balancing its defense relationships with both the US and Russia. The continuation of arms purchases from Russia by Vietnam could potentially lead to sanctions or other punitive measures from the US, complicating the bilateral defense and business relations between the two countries.
During a recent visit by Russian President Vladimir Putin to Vietnam, a series of agreements were signed, including those aimed at bolstering cooperation in various sectors, though none explicitly mentioned defense. Nevertheless, the visit garnered a strong reaction from the US with a spokesperson from the Embassy in Hanoi telling media that “No country should give Putin a platform to promote his war of aggression and otherwise allow him to normalize his atrocities”.
However, while visiting Vietnam a few days after Putin’s trip, US Assistant Secretary of State for East Asia and Pacific Affairs Daniel Kritenbrink stated that trust between the US and Vietnam was at an “all-time high” and that the US respected Vietnam’s independence in its decisions over its security strategy.
4. The future of US-Vietnam diplomacy and defense relations
Under a second Trump term
If Donald Trump were to serve a second term, US-Vietnam defense relations could take a distinct path shaped by his “America First” stance and critical view of US involvement in international conflicts. Despite recognizing Vietnam as a crucial partner in the Indo-Pacific during his first term, Trump’s overall isolationist attitude might undermine efforts to deepen collaboration. His administration’s focus on bilateral deals over multilateral alliances could lead to more transactional and less comprehensive engagement with Vietnam.
However, Trump’s softer approach towards Russia, exemplified by his appeasement and even occasional praise of Putin, suggests that Vietnam might not face US sanctions under the CAATSA for purchasing Russian weapons. This could provide Vietnam with more flexibility in its defense procurement, avoiding the complexities and potential fallout of violating US sanctions.
Despite these challenges, Trump would likely continue to support Vietnam in defense matters, given the shared strategic interest in countering China’s influence in the South China Sea. His administration might continue to provide military equipment and training, viewing Vietnam as a key partner in maintaining regional stability. However, Trump’s unpredictable foreign policy and possible withdrawal from broader strategic commitments could weaken the US’s image in the Indo-Pacific, potentially eroding the trust and cooperation that had been building between the US and Vietnam.
Under a second Biden term
A second term for Biden would likely see a continuation and deepening of US-Vietnam defense relations, underpinned by his administration’s strong foreign policy stance in the Indo-Pacific and commitment to supporting Vietnam’s defense capabilities. Biden’s globalist outlook and emphasis on multilateralism could foster a more stable and predictable partnership with Vietnam. The potential for a significant arms deal, as hinted in ongoing talks, reflects Biden’s intent to advance military cooperation with Vietnam.
However, Biden’s firm stance against Russia, driven by the conflict in Ukraine, might lead to stricter enforcement of CAATSA sanctions. Should Biden enforce these sanctions, it could strain US-Vietnam ties, complicating the delicate balance Vietnam maintains in its defense relationships with both the US and Russia. Biden’s administration would need to navigate this carefully, potentially offering more robust and compatible defense alternatives to Russian equipment to mitigate the impact on Vietnam’s military modernization efforts.
Despite these potential hurdles, Biden’s strong support for Vietnam’s self-reliant defense capabilities and strategic importance in the Indo-Pacific would likely ensure continued robust defense collaboration.
5. Preparing for either outcome: Considerations for businesses
Businesses preparing for potential second terms under either Trump or Biden need to consider several key factors that could impact US-Vietnam trade and investment relations.
Under a hypothetical second Trump term, businesses should brace for the introduction of new tariffs, including the possibility of a 10 percent universal tariff. This policy could significantly escalate trade tensions and increase costs for businesses reliant on imported goods from Vietnam, impacting their competitiveness and profitability.
Trump’s anti-globalist stance and skepticism toward multilateral trade agreements suggest a less favorable environment for comprehensive trade deals like the TPP or bilateral FTAs. This makes the reduction of tariffs and barriers unlikely, limiting opportunities for businesses seeking expanded market access.
Moreover, under Trump, there is a potential for renewed Section 301 investigations targeting Vietnam’s trade practices, similar to those initiated during his first term. This could lead to increased regulatory scrutiny and potential tariffs on Vietnamese goods, further complicating business operations and supply chains.
In contrast, a second Biden term would likely maintain a more globalist stance, focusing on enhancing US-Vietnam trade relations through initiatives like the IPEF. Biden’s approach also emphasizes collaboration on emerging technologies, digital industries, and clean energy. This presents opportunities for businesses involved in these sectors to benefit from increased investment and cooperation initiatives supported by the US government. The emphasis on green energy and technology under Biden could open new avenues for partnerships and growth in these high-demand sectors.
However, businesses must also navigate potential geopolitical tensions, particularly in the South China Sea. Biden’s more interventionist stance toward China and the Indo-Pacific could lead to heightened tensions and potentially impact supply chains and businesses operating in the region. Increased military activity and geopolitical uncertainty may disrupt supply chains and market stability, requiring businesses to adopt flexible strategies to mitigate risks.
Source: Vietnam Briefing
