President Joe Biden is currently in Vietnam for a visit aimed at strengthening economic ties between the United States and Hanoi. This visit is part of efforts to reduce America’s dependence on China. The two nations have upgraded their diplomatic ties to a “comprehensive strategic partnership,” which is seen as a significant move to solidify trust between the two countries. This partnership is crucial for the United States as it seeks an ally in Asia to counteract tensions with China and advance its ambitions in key technologies like chipmaking. Companies like Apple and Intel have already increased their presence in Vietnam, diversifying their supply chains and contributing to the country’s economic expansion.
Biden’s visit to Vietnam, following the G20 summit in India, marks the first visit by a US president since Donald Trump’s trip in 2019. During his visit, Biden has met with Vietnamese General Secretary Nguyen Phu Trong and other leaders to discuss the growth of Vietnam’s technology-focused economy and stability in the region. The United States has seen a significant increase in imports from Vietnam, reaching nearly $127.5 billion in goods in 2022, compared to $101.9 billion in 2021 and $79.6 billion in 2020. Vietnam has become America’s eighth largest trading partner, reflecting the already strong economic ties between the two countries.
The United States has been moving closer to Vietnam as part of its strategy of “friend-shoring” supply chains, which involves relying on allies to reduce dependence on countries with geopolitical tensions like China. Rising labor costs, an uncertain operating environment, and political friction have led many businesses to reconsider their operations in China. The US-China trade war and the COVID-19 pandemic have accelerated this trend, with companies looking to diversify their production hubs. This has led to a significant exodus of manufacturing from China to emerging markets like Vietnam. It is estimated that as many as 28 million Chinese jobs relying on exports to the West could move to Vietnam.
Vietnam’s growth has been fueled by its industrial capabilities, lower wages, and a young population. However, this rapid growth has led to challenges such as stretched factories and overheating demand for manufacturing in the country. While Vietnam remains an attractive alternative to manufacturing in China, there are concerns about factors like Vietnamese tech regulations and the country’s infrastructure compared to China’s.
The United States recognizes Vietnam’s potential in building resilient semiconductor supply chains and has announced a new semiconductor partnership with the country. The semiconductor industry has become a key source of tension in US-China relations, and Vietnam can provide a trusted alternative for the US’ chip supply. Intel has already committed $1.5 billion to a major facility in Vietnam, signaling further investments in the field as the United States strengthens ties with Hanoi.
Despite the challenges posed by the global slowdown and decreased overseas demand, Vietnam’s growth is projected to be faster than many major economies. This makes Vietnam an attractive prospect for corporations seeking bright spots in the current economic environment. Interest in Vietnam has been demonstrated by the US-ASEAN Business Council’s business mission to Vietnam, which consisted of 52 American firms. However, there are reservations among businesses regarding Vietnamese tech regulations and infrastructure limitations.
Vietnam’s similarities to China, as an authoritarian one-party state, may be a concern for some businesses. However, the country’s status as a cheap alternative to manufacturing in China and the presence of Chinese suppliers in Vietnam make it an obvious choice for many sectors. The Biden administration is likely eager to secure Vietnam as an alternative to China. Ultimately, businesses are looking for an easy way to hedge their bets, and Vietnam provides a promising option.