Vietnam’s China ties strengthen amid Trump tariff uncertainty
Vietnam’s cost advantage and dependence on Chinese parts are strengthening ties with Beijing, even with US tariffs
In Vietnam’s northern manufacturing belt, tariff angst isn’t stopping the flow of Chinese money. If anything, it’s growing.
From a Chinese circuit board maker’s eager calls for workers, to construction crews rushing to finish a new plant for a Shenzhen producer of gaming parts, the electronics hub of Bac Ninh province just east of Hanoi is buzzing with Chinese activity. So much so that provincial officials expect to rubber-stamp US$1 billion in new investment licences – many of them Chinese.
These optics may seem unusual amid a geopolitical trade spat. Just months ago, the rhetoric from hawks in US President Donald Trump’s administration had been clear: global producers like Vietnam must rely less on China’s supply chain or risk even higher American tariffs. Trump’s trade adviser Peter Navarro took to Fox News in April and described Vietnam as “essentially a colony of communist China”.
But the reality has painted a different picture for Vietnam. Trump announced in early July that he’d reached a deal with Hanoi, setting tariffs at 20 per cent for goods made in Vietnam and 40 per cent for products suspected of being diverted – or “transshipped” in trade speak – from countries like China. Neighbours in Southeast Asia are getting tariffs of about 20 per cent, while China faces a duty of about 55 per cent, leaving Vietnam relatively secure.
“Vietnam is still in a relatively favourable position,” said Bloomberg Intelligence analyst Steven Tseng. “While its 20 per cent tariff isn’t the lowest, it doesn’t necessarily hurt competitiveness given Vietnam’s cost advantage, established industrial base and geographical proximity to China. It still makes sense for Chinese manufacturers to shift to Vietnam.”
My Trinh, a manager at KCN Vietnam, which builds ready-to-use factories and warehouses for global suppliers, said the first phase of her company’s latest industrial developments sold out fast. Most of the dozen factory shells will bear the logos of Chinese firms, including Shenzhen MYGT, which makes game controllers for Microsoft and Nintendo, and Dongguan Rayking Electronics, a maker of electroacoustic circuit boards.