US-Vietnam trade touched new records in 2021; now there is massive growth potential.
The United States and Vietnam completed 27 years of diplomatic relations on July 12. During this period, the two countries have forged stronger ties to bilateral trade, investment, and regional peace. Now, there are talks of deepening the partnership, with Vietnam leading a delegation to the US.
In ASEAN, Vietnam is slowly becoming the sought-after partner for the US. There is a conscious effort to expand the existing trade relationship. Within ASEAN, Vietnam is the US’ biggest trade partner, with $57.4 billion in total trade as of May 2022.
Among other initiatives, the US and Vietnam will also collaborate on clean energy programmes. A $36 billion five-year USAID project will help Vietnam transition to greener sources of energy.
Strengthening existing ties
Vietnam is undergoing rapid transformation to become the manufacturing hub of the world in the near future. The current leader, China, has already faced production bottlenecks amidst new variants of Covid. American multinationals such as Apple are now shifting their manufacturing units to Vietnam. There’s more to come.
During a 2021 visit to Vietnam, US Vice President Kamala Harris indicated both sides will embark on a strategic partnership. This includes supporting Vietnam to defend trade interests in the South China Sea, a waterway on which China claims sovereignty.
The US-Vietnam future
In 2021, bilateral trade between the US and Vietnam touched $111.56 billion. Machinery, textile, and electronics were among the top three items exported from Vietnam to the US.
American companies such as Apple and Intel are investing heavily in Vietnam. Intel, for example, has invested $475 million into its Vietnamese arm to build a chip assembly facility. This is in addition to the $1 billion investment made in 2006. Intel has also committed to making a multi-fold increase in its Vietnam investment.
Simultaneously, the US is also relaxing product-level tariffs on renewable energy. For instance, there is a two-year tariff exemption on Vietnamese solar panels amidst skyrocketing energy demand.
Experts believe that the existing free trade agreement between the US and Vietnam could be used to enhance supply chain cooperation. Hanoi’s close relationship with the US regional allies, such as Japan and South Korea, is also expected to boost US-Vietnam trade further.
During a recent US delegation visit to Hanoi, the two countries reiterated the focus on socio-economic cooperation, bilateral investment, and sustainable development. The US-Vietnam alliance is also working on future areas of cooperation, including digital economy, economic resilience, and renewable energy. This mutual cooperation will bring economic and geopolitical benefits to both countries. The US-Vietnam partnership will only get stronger from now on.
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