What Does Donald Trump’s Senior Staff Appointments Mean for Vietnam?

Low Risk

Mr. Michael Kokalari, Director of Macroeconomic Research and Capital Market Research at VinaCapital, asserted that Vietnam was the biggest beneficiary in Asia during Mr. Donald Trump’s first term as President of the United States. While Mr. Trump’s second term may not bring as many advantages to Vietnam as the first, VinaCapital believes there is a very low risk that his tariff policies will disrupt the country’s economic growth—a stark contrast to some opinions expressed in the media since Mr. Trump’s re-election.

“Last week, Mr. Trump chose Scott Bessent, who is considered the ideal Treasury Secretary for Vietnam. Mr. Bessent has stated multiple times that Mr. Trump’s tariff proposals are extreme and likely to be softened during negotiations. The recent announcement by Mr. Trump about his intention to impose a 25% tariff on Canada and Mexico should be interpreted in this light,” said Mr. Michael Kokalari.

More importantly for Vietnam, Mr. Bessent supports considering America’s geopolitical objectives when determining tariffs for individual countries. Details on how this strategy might work, as well as other aspects of Mr. Trump’s tariff strategy, were outlined in a report titled “A Guide to Global Trade System Reform.” This document was widely circulated after Mr. Trump’s election, authored by a senior economic policy advisor during Mr. Trump’s first term.

On November 7, VinaCapital released a report titled “Donald Trump’s Re-election as US President Will Not Significantly Affect the Vietnamese Economy,” suggesting that Vietnam could help America reduce its dependence on Chinese-made goods, which are too costly to produce in the US.

Need to Reduce Trade Surplus with the US

Last week, a Forbes article quoted a supply chain expert who argued that if goods were previously made in China, they are now being made in Vietnam, as production is not returning to the US. Another article quoted the CEO of Black and Decker, stating that it would be cost-ineffective for his company to move manufacturing jobs back to America.

“Mr. Trump wants to bring manufacturing jobs back to the US, and he has been vocal about using tariffs to achieve this during his campaign. The core of Mr. Trump’s tariff strategy is to use taxes to pressure China, Germany, and other countries to build factories in America and push for a broad agreement on a ‘Plaza Accord 2.0’ to devalue the US dollar by about 20%,” said Mr. Michael Kokalari.

The VinaCapital expert affirmed that the second objective would encourage the return of manufacturing jobs to the US and benefit Vietnam, as the State Bank has been flexible in regulating the VND-USD exchange rate.

However, the most immediate risk to the Vietnamese stock market is the potential for further US dollar appreciation. The USD/DXY index has risen by about 7% in the period before and after the election, partly due to tariff concerns. The USD/VND exchange rate has declined by nearly 5% so far this year, and if the DXY index continues to rise, the VND depreciation may exceed the critical 5% threshold for the year, prompting the State Bank to tighten monetary policy or raise interest rates to support the VND.

Vietnam’s trade surplus with the US stands at approximately $100 billion, the third-largest after Mexico and Canada. To put this in context, the US Treasury Department has three criteria for considering a country a “currency manipulator,” one of which is maintaining a trade surplus of over $30 billion. Therefore, Vietnam needs to take measures to reduce its trade surplus with the US by increasing purchases of American products such as liquefied natural gas (LNG) and aircraft engines.