Trump Tariffs, The Looming Gloom Place Vietnam In Hot Spot And More So On Global Trade Alliances

Even before he officially reclaims his seat in the Oval Office, President-elect Donald Trump is setting off ripples across the global trade dynamics. His rhetoric, marked by a promise of hefty tariffs and a laser focus on trade deficits, is forcing nations to brace for potentially volatile years ahead.

Among those most at risk is Vietnam, a rising star in global trade but now staring down the barrel of what could be a tough period under a renewed Trump administration.

Vietnam in the Hot Seat

Why Vietnam? Well the numbers say it all—in the first ten months of 2024 alone, Vietnam’s trade surplus with the U.S. surged to $102 billion—a nearly 20% increase compared to the same period last year. Now, China, the European Union, and Mexico top the list of U.S. trade surpluses, while Vietnam sits at a close fourth, making it an obvious target.

“For Trump, the main metric is the trade deficit, and Vietnam’s number is bad,” says Deborah Elms, head of the Asia-based Hinrich Foundation. Vietnam’s vulnerability lies in its limited capacity to retaliate economically, unlike larger players like China or the EU.

A History of Trade Shifts

Vietnam emerged as a key beneficiary of Trump’s earlier tariffs on China, with manufacturers fleeing Beijing’s rising costs and trade barriers. The result was that Tech giants like Apple, Google, and Samsung flocked to Vietnam, transforming the country into a major hub for electronics and industrial manufacturing.

Nearly a third of Vietnam’s exports now head to the U.S., making the relationship crucial yet under Trump not without challenges.

Further, with Peter Navarro—a staunch advocate for American manufacturing and high tariffs—returning to Trump’s trade team, Vietnam’s advantageous position may soon face serious headwinds. Navarro has openly argued for tariffs on Vietnam, claiming they would effectively cut the U.S. trade deficit and strengthen domestic manufacturing.

Can Vietnam Pivot?

The question now is whether Vietnam can adapt quickly enough to avoid punitive measures. Boosting imports from the U.S., such as liquefied natural gas, pharmaceuticals, and aircraft, is one proposed solution but experts remain skeptical about the feasibility of such a rapid shift.

Meanwhile, there are calls for Vietnam to improve traceability and ensure its exports aren’t simply rebranded Chinese goods—another potential flashpoint for the U.S.

Trump 2.0. Scrambling Trade Alliances, Shifting Global Dynamics

The world of trade is bracing for a shake-up, and countries are scrambling to diversify their trade alliances, wary of another wave of protectionist policies and high tariffs.

If Trump’s first term taught the world anything, it’s that the traditional trade playbook no longer applies and the second term could prove to be even more so!

A New Power Duo
The European Union’s recent agreement with Mercosur—a South American trade bloc comprising Argentina, Brazil, Paraguay, Uruguay, and Bolivia—is a prime example of this recalibration. Announced last week, the deal is set to create one of the largest trade zones in the world, slashing tariffs on cars, machinery, and pharmaceuticals exchanged between the two regions.

This agreement, if ratified, could pose a significant challenge for American exporters. For instance, U.S. farmers trying to sell beef, poultry, and soybeans to Europe may find themselves edged out by South American competitors who will enjoy lower tariffs under the new pact.

Therefore, while the U.S. retreats from global trade leadership, other nations are quickly stepping in to fill the void.

The Fallout of Protectionism

Trump’s first term marked a dramatic shift away from globalization and free-trade agreements. His administration left behind a trail of high tariffs, not just against adversaries like China but also allies like Mexico and Europe.

While President Biden attempted to mend diplomatic fences, his administration remained surprisingly protectionist. It is now poised to end as the least active administration in negotiating new trade deals in half a century. This vacuum has not gone unnoticed with U.S. goods increasingly facing discrimination in global markets due to a lack of proactive trade agreements

While trade skepticism has grown globally, much of it has been directed at China, known for flooding markets with cheap products and driving many businesses into bankruptcy. Yet, despite the wariness surrounding China, other nations are forging ahead with new trade agreements, keen to insulate themselves from the unpredictable U.S. trade scene.

Global Trade Shuffle

The global trade chessboard is in flux, and Donald Trump’s return to the Oval Office could trigger a fresh wave of recalibrations much illustrated by Britain as it is set to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) this month—a pact that originated under the Obama administration but was abandoned by Trump during his first term.

This move reflects a broader global strategy: aligning with dynamic trade blocs while the U.S. takes a “timeout on trade,” as Wendy Cutler, vice president at the Asia Society Policy Institute, puts it.

Meanwhile, China is racing ahead. In recent months, it has finalized significant free-trade agreements, including one with a group of Southeast Asian countries and another with Peru.

These deals are not just about economics—they’re a geopolitical statement. While the U.S. retreats into protectionism, China is positioning itself as a global trade leader, locking in partnerships that could reshape supply chains and market access.

Europe’s Balancing Act

Europe, a traditional ally of the U.S., has also found itself in a tricky position. Trump’s criticism of the European Union’s trade barriers and military spending created a rift during his first term, with negotiations for a broader free-trade agreement fizzling out.
Still, European officials are hedging their bets. Dan Mullaney, a senior fellow at the Atlantic Council, notes that while the EU hasn’t abandoned hope for a deal with the U.S., it is actively diversifying.

The recently completed trade agreement with South America’s Mercosur bloc—a long time in the making—was likely accelerated by Trump’s election, driven by a desire to “spread the wealth and diversify the portfolio.”

Across the board, countries are rethinking their reliance on the U.S. market. “The Trump election has given strong impetus to accelerating these efforts,” Cutler explains. Geopolitical tensions, the pandemic, and trade uncertainties are encouraging nations to secure alternative trade partners.

Trump’s Tariff-First Approach

Trump’s trade playbook remains consistent – hefty tariffs as both an economic safeguard and a negotiating tool. During his first term, he left behind a trail of significantly higher tariffs and proposed more aggressive measures for his second term.

Among his ideas are a 10–20% tariff on most global products, a 60% tariff on goods from China, and targeted threats such as a 25% tariff on Canadian and Mexican goods and a 100% tariff on emerging economies considering a common currency to counter the dollar.
But how far will these policies go? Trump has often wielded tariffs to force trade concessions, but his heavy-handed approach risks alienating key allies and driving countries toward alternative markets.

The Last Bit

Trump’s tariff-heavy approach, while protecting American manufacturing in the short term, could have lasting consequences. As countries forge new alliances and strengthen old ones, the U.S. risks losing influence in key markets.

The global trade game is changing, and the U.S. no longer sits at the center of the board. Whether this strategy proves to be a masterstroke or a misstep for the Trump administration—and the American economy—remains to be seen, but from the looks of it the world is not waiting for the U.S. to make its next move!