Amid all the consequences of Donald Trump’s impulse-driven trade wars; amid all the inflows and outflows of goods and services, capital and labor, one new statistic has arrested my attention: The nation which currently has the largest trade surplus with the United States isn’t China or Taiwan or Mexico or any of the usual suspects.
It’s Vietnam.
In the first six months of this year, the value of goods made in Vietnam and imported to the U.S. exceeded the value of U.S.-made goods and services exported to Vietnam by $114 billion—more than the surplus of any other nation.
That’s partly the result, of course, of Trump’s tariffs on China, whose rate was 23.2 percent in June, compared to the rate on Vietnam, which was 6.5 percent in June. (These figures come from the Penn Wharton Budget Model.) It’s partly the result of the low-wage Vietnamese not constituting much of a consumer market: While Vietnamese exports to the U.S. came to $123 billion from January through June, American exports to Vietnam came to just $9 billion. It’s partly the result of Vietnam’s proximity to China, which made it a handy place for such American corporations as Nike and Lululemon, not to mention Apple (the flagship of U.S. production in China), to relocate their factories once it became clear that economic relations between China and the U.S. were in for a long-term downward revision.
Today, Vietnam isn’t just turning out shoes and clothes. As the Journal reports, roughly 60 percent of its exports to the U.S. are machinery or electronics, with companies like Intel, Samsung, and Apple’s own manufacturer, Foxconn, centering much of their production in the country.
But Trump’s tariffs and the economic rivalry between China and the U.S. can’t really be adduced as the long-term cause of this shift in global production between these adjoining Asian nations. Vietnam is surging for the same reason that China once surged: Labor comes cheap, and the state ensures that worker discontent will be held in check. China’s rise as the world’s factory over the past 30 years has enriched that nation to the point that it now has a massive middle class—a transformation still just getting started in its neighbor to the south. While neither nation has reliable data on median household income (or, in the case of Vietnam, any data on median household income), per capita income in China last year came to $14,230, while in Vietnam, it was just $4,970.
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For American corporations looking to boost their profits (which, as the Journal’s Greg Ip recently pointed out, are at their highest share of the nation’s gross income since 1950), the wage differential between China and Vietnam made moving their production to the latter a no-brainer—just as the wage differential between the U.S. and China once made moving their factories from the Middle West to the Middle Kingdom a no-brainer, too.
A quarter-century ago, when advocates of normalizing trade relations with China insisted that doing so would compel China to transform itself into a democracy, America’s unions, a number of social democrats (including at the Prospect), and a smattering of China hands (James Mann in particular) called that argument a non sequitur: Capitalism had co-existed with right-wing authoritarianism and dictatorship, and would with its left-wing (or ostensibly left-wing) counterparts, too. Today, Leninist one-party rule (or in China, neo-Stalinist one-leader rule) gets along just fine with the C-suites of America’s corporations and banks, for the same reason that Wall Street prefers production in “right-to-work” states: the absence of worker power and the ensuing low levels of workers’ wages.
More than half a century ago, the fear that communism would spread across the globe, particularly throughout the former colonies of Asia and Africa, was one of the foundations of our war in Vietnam. What the architects of that cataclysmically mistaken war failed to foresee was that the American economic establishment, for whose interests they largely worked, would eventually diminish its reliance on American workers and answer only to its shareholders, once the spirit and letter of New Deal regulations had eroded sufficiently. And with that new and refined mission, that it would embrace authoritarians not just on the right but on the left as well, most particularly Leninist capitalism, provided they kept wages down and, therefore, profits up.
Thus, the story of U.S.-Vietnamese relations: one of ironies and (when it comes to capital’s need for profits) iron laws.
