1. Trade and Tax Policies

Under Donald Trump, a primary strategy has been to prioritize protecting American domestic manufacturing and reducing dependence on China. In his previous term (2017-2021), Trump implemented several policies, such as raising import tariffs, particularly on goods from China, and renegotiating trade agreements. These policies could continue in his new term if he maintains a tough stance on China.

Vietnam could benefit from these policies in several ways:

• Investment Shift: If U.S. companies face high import tariffs on goods from China, they will seek alternative manufacturing countries. Vietnam, with lower production costs and an attractive investment environment, could become an ideal destination for American manufacturers. Many multinational companies have already shifted part or all of their supply chains from China to Vietnam to avoid U.S. tariffs.
• Improved Investment Environment: Amid U.S.-China trade tensions, Vietnam has proactively upgraded its infrastructure, improved its legal environment, and strengthened free trade agreements. These factors increase Vietnam’s appeal to foreign investors, including American companies. If the Trump administration continues its protectionist trade policy, FDI into Vietnam could keep growing.

However, there are potential risks:

• Uncertainty in Tax Policies: Under Trump, trade and tax policies can change rapidly and unpredictably. This could create uncertainty for investors. If protectionist measures become too aggressive or lead to global trade conflicts, FDI flows into Vietnam could be negatively affected.

2. Supply Chains and Production Shift

Vietnam has emerged as a key alternative manufacturing destination amid escalating U.S.-China trade tensions. This trend could continue if Donald Trump sustains his policy of putting pressure on China. Below are the key factors influencing FDI flows into Vietnam related to supply chains:

• Diversification of Global Supply Chains: During his previous term, Trump pushed for reducing dependence on China in global supply chains. This led to a production shift away from China, with Vietnam being one of the primary beneficiaries. Sectors such as electronics, textiles, footwear, and auto parts have seen increased investment from multinational companies aiming to mitigate risks associated with overreliance on China.
• Attracting Major Investors: Large technology companies like Apple, Samsung, and Intel have relocated parts of their production lines or increased investment in Vietnam to avoid U.S. tariffs on goods produced in China. Vietnam offers a relatively stable production environment, low labor costs, and a diverse network of free trade agreements, allowing international companies easier access to global markets.
• Strategic Geographical Location: Vietnam’s strategic location near China allows companies to shift production without completely rebuilding supply chains. Additionally, Vietnam’s port and domestic transportation infrastructure have significantly improved in recent years, facilitating import and export activities.

However, Vietnam also faces challenges:

• Infrastructure Capacity and Domestic Supply Chains: Despite improvements, Vietnam’s infrastructure, including transportation, logistics, and domestic supply chains, still does not fully meet the needs of major investors. To compete with China or other ASEAN countries, Vietnam needs to continue investing heavily in infrastructure and enhancing supply chain management capabilities.
• Pressure from Regional Competitors: Countries like Thailand, Indonesia, and Malaysia are also striving to attract FDI through incentives and investment-friendly policies. This creates intense competition in the region, requiring Vietnam to maintain and enhance its attractiveness through stable policies, transparent legal mechanisms, and modern infrastructure.

Donald Trump’s victory in the 2024 U.S. presidential election could accelerate production shifts and increase FDI flows into Vietnam due to America’s protectionist trade policies. However, Vietnam must continue to improve its investment environment and develop infrastructure to capitalize on this opportunity effectively.

Vu Ho