In a lackluster global economy, Vietnam’s problems are good ones to have. The key challenge for this star Southeast Asian exporter is hitting a sky-high target for growth this year.
One of the country’s top statisticians said it would be “extremely” difficult for the expansion to reach 8.5 percent, the target the Vietnamese government has set (and one that no consequential economy is likely to log). However, Vietnam has a great starting point. It did better than almost anyone expected last quarter, and the outlook is still solid. Even coming close would be a win, given the tariffs imposed by US President Donald Trump.
Vietnam’s performance in the past three months has been truly impressive. GDP climbed 8.2 percent from a year earlier, the fastest clip since 2022, and second-quarter numbers were revised upward. The star was manufacturing, which has jumped 10 percent since January, and was still humming through last month. Some of this surge reflected a rush to get orders filled and shipped before Trump’s levies took effect in early August. However, there is little sign things have cooled significantly since then.
This week, the Southeast Asian country clinched a long-awaited upgrade from FTSE Russell to emerging-market status, putting it in the same category as China, India and Indonesia, and potentially adding billions in capital flow to its markets. The benchmark stock index is up 33 percent this year, in part reflecting anticipation of the shift, but also an acknowledgement of a strong economy.
The buoyant sentiment is a far cry from the warnings that accompanied the White House’s “liberation day” tariff announcement on April 2. While the levies on Vietnam’s exports are high relative to those prior to April, leaders did a good job whittling them down to 20 percent. Duties around that level seem to be the norm for most of Southeast Asia. Close security ties with Washington did not prevent the Philippines and Thailand from being tagged with 19 percent each, along with Malaysia and Indonesia.
That the US’ huge leverage over Vietnam would make it a special target did not pan out. It is not that Hanoi is not exposed: More than one-quarter of GDP depends on shipments to the US; overall exports are equal to about 90 percent of the Vietnamese economy. About half of Nike Inc shoes are made there, and Lululemon Athletica Inc churns out large amounts of merchandise. Tech matters greatly, too, with Intel Corp and Apple Inc operating there.
Vietnam’s rapid rise in living standards since the economy opened after the Cold War resembles China. This should restrain the celebrations. Like its northern neighbor, Vietnam first turned to low-cost manufacturing, then consumer goods and now, electronics and semiconductors meant for the US market. Like China, it was very successful; growth became turbocharged, and with it, the trade surplus, drawing scrutiny from Washington. However, Vietnam has avoided being on the outer for long. Hanoi does not trumpet designs on capturing the world market for electric vehicles or high technology, nor aim to push the US out of the Western Pacific region.
In the unlikely event such aims do ever exist, Vietnam would be well advised to hide them. Emerging markets tend to prefer the “status quo,” especially if they are relatively small and have a long way to go to meet broader objectives. Vietnamese Communist Party General Secretary To Lam, who has embarked on a reform drive, recently wondered whether the nation was destined to be stuck at the low end of the value chain, a provider of outsourced labor for international conglomerates.
“How much do we really earn?” Lam asked, according to a report by a Singapore think tank. “Perhaps just the labor cost — and the environmental pollution.”
Elements of China’s playbook are apparent in the drive for development. The State Bank of Vietnam has been guiding the nation’s currency, the dong, lower. It has fallen more than 3 percent this year to trade near a record low against the US dollar. Officials have little incentive to allow much appreciation.
When Trump imposed tariffs on China in his first term, Vietnam became the go-to place for adding industrial capacity in Asia. It was close to China, but not in it, and it was cheap. The value proposition still makes sense. I was skeptical about the tag “trade-war winner” often casually applied to Vietnam — the slogan implied that the country faced no challenges and that replicating China’s strategy was cost free.
I might have been a bit harsh. The latest numbers are impressive. Still, plenty of hurdles await, from declining fertility to an overhaul of the financial system, and even upheavals along the Mekong River. Trade-war survivor would be good enough, for now.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously, he was executive editor for economics at Bloomberg News. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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