‘No winners’ in a trade war, proclaims China’s Xi, as he heads to Vietnam on charm offensive

Xi Jinping Warns Against Trade War During Southeast Asia Tour

President Xi Jinping of China has cautioned against the perils of a trade war, asserting that such conflicts produce “no winners” and that protectionism is “futile.” His remarks came at the commencement of a three-nation Southeast Asian tour, beginning in Vietnam on Monday, aimed at bolstering economic and diplomatic China-Southeast Asia ties amidst global trade uncertainties.

Strengthening Regional Alliances Amidst Trade Tensions

Xi’s itinerary, which started in Hanoi, encompasses state visits to Malaysia and Cambodia. The objective of this diplomatic outreach is to fortify relationships with China’s immediate neighbors in a period marked by trade disputes that have sent ripples throughout international markets. This tour underscores China’s commitment to regional stability and cooperation amid ongoing trade war concerns.

China’s Stance on Global Trade

In an article published in Vietnam’s Nhan Dan newspaper, as reported by China’s Xinhua news agency, Xi emphasized the necessity for Vietnam to “resolutely safeguard the multilateral trading system, stable global industrial and supply chains, and an open and cooperative international environment.” His statement reflects Beijing’s desire for a predictable and equitable global trade landscape.

He reiterated his strong stance, declaring that “a trade war and tariff war will produce no victor, and protectionism will lead nowhere.” This declaration is seen as a direct message concerning the current global economic climate and the risks of escalating trade friction.

Contrasting China as a Reliable Partner

Xi’s visit is widely interpreted as an effort to project China as a dependable partner, contrasting Beijing’s approach with that of Washington. The United States previously imposed, and subsequently suspended, significant tariffs across Southeast Asia, a region heavily reliant on exports. China aims to position itself as a steadfast ally in the face of fluctuating US trade policies.

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Vietnam’s Concerns Over US Tariffs

Officials in Vietnam, a prominent manufacturing hub, expressed significant concern when Washington levied a 46% tariff on Vietnamese goods. This action occurred despite Vietnam’s efforts to engage with and appease the previous US administration. While currently paused, the imposed tariff posed a considerable threat to Vietnam’s ambitious economic development plans. The episode underscores the vulnerability of Southeast Asian nations to shifts in US trade policy.

Agreements and Cooperation on the Horizon

During Xi’s visit, Vietnam and China are anticipated to formalize approximately 40 agreements spanning diverse sectors, according to Vietnam’s Deputy Prime Minister, Bui Thanh Son. These agreements are expected to encompass collaborative projects in infrastructure development, including the expansion of Vietnam’s railway network, signifying deeper economic partnership.

Vietnam Seeks Enhanced Bilateral Ties

Vietnamese leader To Lam, in a separate article published in state media, conveyed Hanoi’s aspiration to strengthen bilateral cooperation with China in key areas such as defense, security, and infrastructure, with a particular focus on enhancing rail connectivity. This highlights Vietnam’s strategic interest in reinforcing its multifaceted relationship with China.

Navigating US-China Relations: A Balancing Act for Southeast Asia

Vietnam, along with numerous other Southeast Asian nations, is navigating a delicate equilibrium in its relationships with both the United States and China. The US represents Vietnam’s primary export market, accounting for a substantial 30% of Vietnam’s GDP. Conversely, China serves as Vietnam’s leading import source, providing crucial raw materials and supplies essential for manufacturing goods destined for export, including to the US.

Avoiding Antagonizing Major Trade Partners

Historically, Vietnam has maintained a neutral stance between the US and China, seeking to avoid alienating either major power. This approach is particularly crucial as Vietnam endeavors to persuade Washington to reduce the 46% tariff. Maintaining amicable relations with both nations is vital for Vietnam’s economic stability and growth trajectory.

Vietnam’s Trade Surplus and Vulnerability to Tariffs

Vietnam’s susceptibility to US tariffs stems partly from its rapidly expanding trade surplus with the United States, which has surpassed $123 billion. This surge is partly attributed to businesses relocating production to Vietnam to circumvent tariffs previously imposed on China by the former US administration. This economic dynamic places Vietnam in a sensitive position within the context of US-China trade relations.

Measures to Mitigate Tariff Impact

Hanoi is reportedly preparing to implement stricter measures to control the transit of Chinese goods through its territory to the US in an effort to appease Washington. This includes tightening regulations on sensitive exports to China. Additionally, Vietnam has offered trade concessions, such as eliminating tariffs on all US imports and increasing purchases of American goods, as part of broader efforts to manage trade tensions and maintain favorable economic relationships.

Regional Implications of Trade Disputes

Cambodia and Malaysia, also facing substantial US tariffs of 49% and 24% respectively, are similarly seeking negotiations with Washington. In contrast, China has previously declared its resolve to “fight to the end” if the US persists in escalating the trade war. These contrasting responses illustrate the complex and varied reactions across Southeast Asia to ongoing global trade disputes.