Key View
- We expect a relatively high degree of geopolitical risk for Vietnam due to the escalating US-China rivalry.
- But while we think Vietnam will come under tariff threats from US President Donald Trump, we think it will be able to stave off aggressive tariff hikes through negotiation.
- Internally, we expect institutional stability to continue even as To Lam continues to consolidate power through political reforms and crackdowns on corruption.
We expect a relatively high degree of geopolitical risk for Vietnam due to the escalating US-China rivalry. As President Trump presides over a tougher US stance against China, it will make it more difficult for Vietnam to continue its “Bamboo Diplomacy”: Balancing competing geopolitical interests between superpowers, namely the US and Mainland China.
Vietnam’s traditionally agile “Bamboo Diplomacy,” characterized by its ability to bend and adapt to shifting geopolitical landscapes without breaking, faced significant challenges during the Trump administration. This diplomatic strategy, rooted in balancing relations between major powers like the U.S. and China, sought to maintain Vietnam’s sovereignty and economic growth. However, President Trump’s hardline trade policies and unpredictable foreign policy approaches led to heightened tensions and uncertainty for Vietnam. The imposition of tariffs and the emphasis on bilateral trade deficits complicated Vietnam’s economic strategies, which heavily relied on exports.
The Trump administration’s confrontational stance towards China initially provided Vietnam with strategic leverage, as the country sought to strengthen ties with the U.S. to counterbalance China’s regional influence. However, the inconsistent nature of U.S. foreign policy under Trump made it difficult for Vietnam to fully commit to any one strategy. The withdrawal from multinational agreements like the Trans-Pacific Partnership (TPP) left Vietnam seeking new ways to secure its economic interests while managing complex dynamics with its northern neighbor.
Nonetheless, Vietnam’s leaders remained focused on preserving their nation’s diplomatic flexibility. The Bamboo Diplomacy approach, while tested, underscored Vietnam’s resilience and adaptability in navigating global uncertainties. By engaging in multilateral forums and diversifying economic partnerships, Vietnam aimed to ensure continued growth and geopolitical stability. As it confronted these challenges, the nation worked diligently to refine its diplomatic strategies, ensuring that its Bamboo Diplomacy could withstand the turbulent winds of changing U.S. policies.
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