Looking beyond Trump’s trade wars

July 02, 2019 - 07:10

Việt Nam has set a course for continued prosperity which means demand for professional wealth management services will only grow and grow as this dynamic country becomes even more of a global big-hitter.

No Title

Brian Spence*

As a European who is now proud to call Hà Nội my home, I am hugely excited by the historic trade deal Việt Nam inked with the EU on June 30. As a financial adviser, I am even more so. Việt Nam has set a course for continued prosperity which means demand for professional wealth management services will only grow and grow as this dynamic country becomes even more of a global big-hitter.

Attention has been focused on how the bitter trade war between the US and China has benefited Việt Nam, but in my view, it is developments with Europe that should be getting people far more excited about the future.

The EU’s free trade deal with Việt Nam is the most ambitious it has ever entered with a developing country and when you fully appreciate its scope and likely impact it is little wonder it has taken since 2012 to conclude. For Việt Nam, those painstaking negotiations could hardly have had a better result. The agreement provides a balm to those worried about the threat of US tariffs at a crucial time (of which more later) and shows just how well diversified the Vietnamese economy is set to become.

The FTA allows for an almost total elimination of customs duties between Việt Nam and the EU, with over 70 per cent of those on Vietnamese exports disappearing immediately and the remainder gone by 2026. No less important is an accompanying Investment Protection Agreement which will hugely boost Việt Nam’s already abundant attractions for foreign investors.

Speaking from experience, few Europeans realise that Việt Nam is the EU’s second biggest trading partner in Southeast Asia (after Singapore) and that goods and services amounting to €54 billion (US$61 billion) pass between the two each year already. Telecoms equipment, clothing and food products currently make up the bulk of Vietnamese exports to the EU, but the sky really is the limit now that barriers to trade are being so comprehensively torn down.

The EU story provides an incredibly optimistic parallel narrative to that focused on Sino-US relations and underscores that Việt Nam is perhaps not as vulnerable to America’s threatened wrath as some fear.


In a sense, President Trump’s rumblings about imposing tariffs show just how strongly the tailwinds of its trade war with China have benefited this dynamic country. However, the numbers already speak for themselves. 

Việt Nam outstripped projections to achieve a sizzling 6.71 per cent rise in real Gross Domestic Product for the second quarter, scarcely falling back from the 6.82 per cent uptick seen in the first and cementing the country’s position at the forefront of Southeast Asian economic growth. Yet even more stunning is the veritable tidal wave of Chinese investment that has flooded in this year.

A highly productive, relatively cheap workforce coupled with an advantageous geographical position has meant Việt Nam has long been favoured by the Chinese as a manufacturing hub. The States’ punitive trade tariffs on Chinese exports has taken things to another level. As companies rush to set up alternative production centres in Việt Nam, Chinese investment is reported to have hit almost $1.7 billion already this year – five times that in 2018. Correspondingly, Việt Nam’s exports to the US have grown by over a quarter from last year and are expected by many to continue to rise.

President Trump’s sabre-rattling is centred on the notion that the Chinese are merely re-routing exports via Việt Nam and gaming the system with spurious labelling of goods. To me, that bears little resemblance to reality at all.

The Vietnamese authorities are robustly cracking down on any element of “trans-shipment” or fraud that may have been taking place. This is a wise move reputationally of course, but shouldn’t obscure the real story of a glorious manufacturing relocation boom clear to anyone with eyes to see.

A flood of FDI

Rapid improvements to the Southeast Asian supply chain have seen a plethora of Chinese companies shifting production to Việt Nam in recent years and there has been an almost wholesale transplantation of Hong Kong’s manufacturing base to Guangdong taking place since the turn of the millennium. From South Korea, meanwhile, Samsung is just the headline electronics manufacturer to have piled in. Ramping up an already very strong trend, over $9 billion in foreign direct investment has come into Việt Nam in the first six months of this year alone.

Nor, of course, is Việt Nam just a proxy for other nations’ ambitions. The bitterness of China and America’s trade war has dented demand for Chinese-made goods on principle and Vietnamese companies have been quick to step into the breach in their own right. My own work in advising on Mergers and Acquisitions confirms just how expansionary Vietnamese companies have become, while signs of a wealth boom for both High Net Worth Individuals and the burgeoning middle-class are impossible to miss.

In short, the foundations for future success have been laid more broadly and deeply than outmoded conceptions of this country’s economy allow.

All around the world, we can expect the “Made in Vietnam” label to become ever more ubiquitous – not to mention prestigious in light of the technological innovations taking place here at a lightening pace. And now that the EU has extended our country’s goods and services the very warmest of welcomes, the vagaries of American policy have far reduced power to act as a brake on the juggernaut of growth.

To borrow President Trump’s own phrase, Việt Nam is “winning” on a number of fronts. Long may it continue to do so.

* Brian Spence is managing partner of S&P Investments. He has more than 35 years of experience in the UK financial services industry as an investment manager, financial planner and M&A specialist. He is a regular contributor to the UK financial press and has a deep understanding of the financial services community. Brian’s column will reflect on all the challenges and opportunities within the Vietnamese market, bringing a fresh perspective to today’s hottest issues. The columnist’s email address is brian@sandpinvestments.com.