Vietnam gains manufacturing ground – but will this provoke US tariffs?

Vietnam is gaining ground as an alternative to China, but there are warnings that too-rapid growth could provoke tariffs from the new US administration.

Speaking to the Freight Buyers’ Club podcast, Tektronik Industries’ VP for global logistics, Alan Mctaggart, said that in 2018 the company began moving some of its manufacturing base into the South-east Asian country during the previous Trump government.

He said despite China having been a “easy, easy, easy” country in which to operate, Vietnam had also become “a productive place” for the company and was working well.

Tektronik’s move south was precipitated by the more hostile approach to China Mr Trump’s first administration brought into the White House, an approach continued, albeit with calmer rhetoric, by President Biden.

Since 2016, Vietnam has made sizeable strides in manufacturing output and now finds itself below just China and Mexico in terms of its trade surplus with the US.

And Mr Mctaggart said he could see further growth for the country, noting that he expects outsourcing to continue, especially if China is hit with particularly high tariffs.

While this may prompt optimism for the South-east Asian countries that have been lining up as replacements for China, there are voices of caution in Vietnam.

One source told the Trump administration appeared more focused on trade deficits this time around, than what they largely considered to be his previous more sinophobic stance.

Consequently, referencing the huge trade deficit between the US and Vietnam, they said it was likely Vietnam, if not already in the US crosshairs, was certainly being scoped.

Drewry Shipping Consultants’ MD and head of its supply chain advisors, Philip Dammas, told Freight Buyers Club it was not impossible that Mr Trump would impose tariffs on the US’s three biggest suppliers – China, Mexico, and Vietnam.

However, he added that the early signs indicated that the “huge trade war” talked-up during the election campaign may be avoided.

“Based on the data today, it looks as if it’s going to be a bit more targeted and less disruptive for carriers and forwarders and shippers. So, we stick with our previous forecast that there will be a slow increase in demand this year,” said Mr Dammas.