If Donald Trump’s ghostwriter Tony Schwartz is mulling a sequel to “Art of the Deal,” he may find inspiration in Hanoi.
There, Schwartz will encounter a group of leaders running circles around his earlier muse, dating back to that 1987 bestseller. And, in the process, reminding investors everywhere why Vietnam’s Covid-19 economic bounce back is no fluke.
Prime Minister Nguyen Xuan Phuc’s government was doing its best to keep a low profile. All that changed earlier this month when President Trump’s Treasury Department formally labeled Vietnam a “currency manipulator.” Though Team Trump gave China a pass, it brought the hammer down on a nation with gross domestic product comparable to Louisiana, about $262 billion.
The reason: Trump is irked that Vietnam won a trade war he thought would prompt CEOs to move millions of factory jobs from China to America. Instead, much of that labor migration favored Vietnam.
Between July and August alone, Washington’s trade deficit with Hanoi jumped 11% to $7.6 billion, a roughly 39% increase from a year earlier. By October, it had risen to $8.74 billion. Trump already had lots of explaining to do over the tens of billions of dollars of bailouts he’s had to extend to U.S. farmers ruined by his China tariffs.
That’s billions borrowed from China to aid agricultural interests slammed by Trump’s trade war. Seeing tiny Vietnam reap the benefits adds insult to injury. And it has Trump lashing out, targeting Vietnam’s exchange rate.
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The good news for Phuc’s government is that Trump will soon leave the scene. Joe Biden’s White House is more likely to prioritize Vietnam’s friendship, diplomatically speaking, over petty score-settling. What, after all, does America’s ginormous economy get from antagonizing a small one destined to be a significant power in Southeast Asia?
Vietnam is often seen as a “mini-China” of sorts. A gross oversimplification, of course. Comparisons stem from Vietnam’s locale, 97 million-plus population and its reasonably similar governing system. Amid the trade war fallout, Hanoi wisely positioned itself as an ideal hedge against Trump and China’s Xi Jinping going toe-to-toe.
This dynamic is partly why Vietnam is likely to grow at least 6.5% in 2021, while Biden inherits a pandemic-decimated economy. Nor is Vietnam’s moment in the spotlight likely to be fleeting. It has a relative wage advantage in sectors from garments to furniture to the manufacture of consumer goods. Though South Asia, particularly Bangladesh, is making a run at factories fleeing China, Vietnam boasts better infrastructure and geographical placement within regional supply chains.
Vietnam’s boom is Phuc’s to lose. There’s much his government needs to do to raise its economic game and sustain the gains of recent years.
It matters that Hanoi appears to have handled the coronavirus well so far. Officially, the nation has reported only about 35 deaths. Even so, Hanoi must intensify efforts to root out corruption. It must strengthen the banking system, internationalize corporate governance and raise its stock market game.
Vietnam must shrink the size of the state sector to create more space for private enterprise. It must diversify growth engines away from exports toward services, innovation and tech startups. It must up investments in education and training to increase productivity.
Vietnam’s leadership also must embrace a freer media and internet. Clamping down on social media outlets is counterproductive in the long run. It’s hard to argue, decades on, that China’s “Great Firewall” has helped Beijing achieve any of its economic objectives. President Xi’s tenure is making China more opaque.
For now, though, Vietnam is teaching a masterclass in the art of the deal at which Trump was supposed to excel. And in ways ghostwriter Schwartz, in a series of recent interviews, now says must drive the president crazy as tiny Vietnam outmaneuvers the mighty Trump Nation.
One of Schwartz’s most interesting Vietnam-related Trump observations came out of a February 2019 interview with Politico. “Weakness is Trump’s greatest fear,” Schwartz said. As such, he said, Trump’s takeaway of the war in Vietnam was viscerally unsettling, “his worst fear writ large—that the enemy, with far less money and resources, would figure out a way to outwit the Goliath.”
Vietnam, let’s face it, did a far better job putting out the welcome mat for multinational companies, negotiating deals to create new jobs and raise wages and coming out on top from the soft-power marketing standpoint. As this dawned on Trump, Treasury Secretary Steven Mnuchin fired a shot across Hanoi’s bow.
Trump’s 11th-hour Vietnam broadside seems at once Freudian and a bit Shakespearean, too. As Schwartz and many a Trump biographer point out, Trump has always been sensitive to the perception of him as a Vietnam draft-dodger. Now Vietnam is piecing the myth of Trump’s art-of-the-deal reputation, too.