What to do about a problem like…Trump?
/Poor Vietnam. It seems like they are on a roller coaster with the US. The China-US trade war benefits them! Then they host the North Korean Summit! Vietnam is on top! They are a global player! Trump’s number 1!
But uh, oh, there are rumblings about their manipulating their currency (see post on May 10).
Yet, they are saved! The US treasury, after reviewing further “evidence,” decides that Vietnam is not a no good currency manipulator (see post on May 28). Things are looking up again - this year is going to be killer!
Yesterday, on Maria Bartiromo’s* show on Fox Business, Trump said a lot of things, but the one that matters for this blog is that “Vietnam takes advantage of us [the United States] even worse than China.”
This drove down the stock market 1.67% today (the market was closed by the time of the interview yesterday).
Of course, Trump seemed to indicate that he might tariffs on Vietnamese goods. Juicy quote:
“Well, we’re in discussions with Vietnam. Vietnam is almost the single worst – much smaller than China, much, but it’s almost the single worst abuser of everybody,” eliciting a “wow” from his interviewer.
If you remember the 2016 election, Trump called China a currency manipulator and said one of the first things that we would do would be to label it as such, which could then lead to negotiations and eventually sanctions on OPIC (or the new DFC) from working in China. Trump never labeled it a currency manipulator (because Treasury never wanted to), but Trump did get his trade war.
That’s the worst case for Vietnam: It tries to negotiate something but is unable to meet US demands, and so tariffs are applied. I don’t think that will happen, because I think the Vietnamese will not push back as much as the Chinese have (and the manufacturing in Vietnam is not actually homegrown companies).
I think there is a real possibility that Trump will put pressure on Vietnam to buy more American goods (in the interview he says he likes that Vietnam buys West Virginia coal), and the Vietnamese will announce lots of initiatives to do so and implement some of them. Trump will then get to declare a win, and things will be almost exactly the same as they are now.
But the bigger issue for the US is that it is fighting on all fronts:
Trump has a trade war with China
Forced a renegotiation of NAFTA with both Canada and Mexico
And after agreeing to revised terms, threatened tariffs on Mexico over asylum seekers (that were not implemented in the end)
Put tariffs on European goods (in the same interview he said Europe is worse than China in terms of taking advantage of the US.
Backed out of the Iran nuclear deal, pissing off all of the other partners in the agreement
Then almost striking Iran, despite lacking credibility
Pissing off Korea and Japan and other allies with a mooted plan to charge them for US bases
Pulling out of TPP
This is a list of how NOT to win friends and influence people. I actually have mixed feelings about the trade war with China and the Huawei sanctions, but even if that is a good idea (and I am not saying that) it seems crazy to me that you would try to attack on every front at the same time. America has been blessed by a strong economy, so the repercussions have been minimal so far. But that may not persist, and when the economy starts to weaken, it is going to look ugly for the US. I don’t see anyone coming to Trump’s support in times of trouble.
*Side note: I remember her well from working at Citi during the Todd Thompson imbroglio - read about it. Private jets, alleged adultery, divorce, firings. It’s pretty crazy.