President Donald Trump’s trade war with China was a bruising exercise that tanked business investment, weighed down manufacturing, and resulted in a stop-gap deal that will probably help out America’s soybean farmers but doesn’t really address the core tensions between the two countries. There was, however, at least one nation that came out of the ordeal a clear winner: Vietnam.
U.S. imports from China fell by $87 billion during 2019, or 16 percent, according to data released by the Census Bureau on Wednesday. That sharp decline was largely driven by the White House’s tariffs, which significantly disrupted trade between the two countries. (Shipments from Hong Kong, which are tracked separately, also shrank.) But overall, goods imports only dwindled $42.6 billion, or 1.7 percent, as other countries picked up business the Chinese lost. The biggest gainer was Vietnam, which many American companies have turned to as a reliable supply-chain alternative for things such as clothing manufacturing. Imports from there surged by 36 percent, or $17.5 billion.
The fact that a good deal of production shifted from China to other countries in Asia last year instead of returning to the United States illustrates one of the more fundamental problems with Trump’s approach to trade. The president tends to obsess over America’s trade deficits with individual countries like China or Mexico, and seems to believe that he can fix our overall trade gap with the world by forcing those partners into better agreements or simply cutting off their exports with tariffs. In other words, he sees all of trade in purely one-on-one, transactional terms. But our global trade shortfall is in fact driven by macroeconomic factors like savings and investment that affect the value of the dollar, which means that shrinking our deficit with one country may well lead it to grow with another. In a year when Trump really did follow through on his promise to get tough with China, the deficit in goods and services combined fell by just 1.7 percent, as both our imports and our exports took a hit. The latter helps partly explain why, despite Trump’s talk of a “blue collar boom,” U.S. manufacturing activity actually declined a bit over the year, according to the Federal Reserve’s index of industrial production. The good people of Hanoi, though, appear to be better off for his efforts.