Sunday, July 14, 2024

Unintended Consequences of Donald Trump’s Trade Wars.

July 27, 2019 by  
Filed under Money/Business, News, Politics, Weekly Columns

( “Vietnam has benefited from a surge in exports and foreign investment as businesses look to scale back their China operations or relocate to avoid higher U.S. tariffs. But it’s also fighting claims that Chinese exporters are routing their goods via Vietnam and slapping fake labels on their products to bypass the tariffs.”

President Trump’s ongoing trade wars are resulting in numerous unintended consequences such as other nation’s leaders being both leery and weary of Trump’s policies and aggressively scrambling to circumvent his tariffs against China, the EU and other nations.

As I mentioned in a previous commentary, China, Mexico, Indiaand places like Viet Nam are not “stealing American jobs” as Trump disingenuously claims. Investors, venture capitalists, corporations and multi-national businesses seeking cheaper labor, access to cheaper raw materials, lower taxes, less government regulation and cheaper operating costs have shipped capital and jobs overseas to increase their bottom line.

Trump plays on the ignorance of his voting base and Americans in general to demonize foreign leaders because the US has massive trade imbalances with their countries. But when you look past Trump’s jingoist rhetoric, you discover the trade imbalances are due to Western globalization (neocolonialism) which was pushed by the US ruling class, backed by American politicians at the expense of American workers!

 Trump’s response has been to threaten, demonize and impose tariffs which so far are not having the desired results of bringing China to the negotiating table and caving in to Trump’s demands or boosting US trade around the world. Trump’s tariffs against China and China’s tit for tat responses are negatively impacting the bottom line of US farmers, businesses and investors and will hurt US consumers. The raising costs of the trade wars and concurrent inflation will severely impact US consumers because it is the consumers who pay the added costs of the duties and tariffs not the exporting nation!

To avoid the added expense of Trump’s tariffs some US companies placed large orders prior to Trump’s Tariffs going into effect. Some USbusinesses are rerouting their Chinese made products through Viet Namand changing the labels to avoid paying the tariffs while others are increasing their investments in Viet Nam and setting up their manufacturing plants and factories there.

Viet Nam is experiencing an economic boom in part due to the US- China trade war.  “Vietnam is flying high these days on nearly all metrics. Gross domestic product (GDP) is projected to grow 7%, foreign direct investment (FDI) is fast rising and a newly signed free trade agreement with Europe promises new privileged access to rich export markets. The only fly in the anointment comes from across the ocean in Washington, the capital of its former battlefield adversary where the unpredictable US President Donald Trump is waging trade wars on various fronts. Vietnam has so far been a big winner of the Sino-US trade war. That’s been seen in booming Foreign Direct Investment (FDI) inflows from China, both from foreign and Chinese companies relocating their production facilities to Vietnam to avoid US tariffs, and subsequent rising exports to the US. Vietnam has so far been a big winner of the Sino-US trade war. That’s been seen in booming FDI inflows from China, both from foreign and Chinese companies relocating their production facilities to Vietnam to avoid US tariffs, and subsequent rising exports to the US. ” No Stopping Viet Nam’s Trade War Juggernaut- Peter Janssen

Viet Nam offers cheaper labor, cheaper even than China. “Vietnam has a large, fairly well-educated work force who earn factory wages that are one third of China’s, half of Thailand’s and less than Indonesia’s or the Philippines.” Ibid

Viet Nam is making deals with Europe and its’ Asian neighbors and interestingly enough now Viet Nam has a growing trade surplus against the US. “The country has gone from being the 12th largest source of US imports in 2018 to ranking 8th at the end of May this year, with the US importing $25.8 billion worth of Vietnamese goods and only sending $4.2 billion of exports to Vietnam in return. That’s made Vietnam 5th worldwide in terms of trade surpluses with the US, trailing only China, Mexico, Japan and Germany, according to US Census Bureau figures.” Ibid

Now Trump is casting a menacing eye towards Viet Nam! If the only tool you have is a hammer you tend to treat everything like it’s a nail. This is what Trump is doing with global trade. “Just last month, the U.S. Treasury added Vietnam to a watch list of countries it’s monitoring for possible currency manipulation. The nation’s benchmark VN Index slumped 1.7% Thursday, to the lowest since Feb. 12.”

Currency manipulation is another one of Trump’s disingenuous charges what is the Federal Reserve Bank’s Qualitative Easing and Qualitative Tightening but inflationary and deflationary monetary policy? Keep an eye on this situation because it could mean another nation Trump will antagonize and alienate with his misguided tariffs and trade policies.

Columnist; Junious Ricardo Stanton

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