Trump's trade policies could shape Vietnam's economic outlook: Dragon Capital

Ha Long Bay. Photo: Unsplash

On November 13, Dragon Capital noted that the outcome of the US presidential election could trigger significant policy changes, impacting economies worldwide over the next four years.

During his 2024 election campaign, Donald Trump proposed a 60 per cent tariff on goods from China to address the trade deficit and encourage domestic manufacturing, along with tariffs of 10 to 20 per cent on other countries to protect US industries. “Trump's proposed tariffs, if implemented, could negatively impact exporting countries, including Vietnam,” Dragon Capital cautioned.

Bilateral trade between Vietnam and the United States has seen substantial growth, from $50 billion in 2016 to $110 billion in 2023, supported by strengthened diplomatic ties and the establishment of a Comprehensive Strategic Partnership to foster cooperation. Dragon Capital suggests this partnership could help mitigate trade-related tensions.

Impact on the stock market and investor outlook

Turning to Vietnam's stock market, Dragon Capital observed that listed companies achieved strong net profit growth of 19.1 per cent in the three years before the COVID-19 pandemic under Trump’s first term, underscoring their resilience despite global uncertainties.

“However, Trump’s unpredictable policies and statements increased market volatility during that period, although the VN-Index still recorded a compound annual return of around 15 per cent,” the fund stated.

Dragon Capital recommended investors monitor these developments closely due to potential impacts on Vietnam’s export sectors and market stability. “Vietnam’s economic and trade prospects continue to look relatively optimistic, bolstered by the government’s growth-oriented policies,” the fund stated. However, a stronger US dollar could draw foreign capital away from emerging markets.

On the other hand, Dragon Capital outlined two scenarios that could potentially impact Vietnam’s economy. In a protectionist scenario, trade barriers could reduce profit growth for Vietnamese companies from the current 16-18 per cent to between 5-9 per cent. Alternatively, targeted tariffs could allow Vietnam to capitalise on reduced competition with China, potentially increasing its market share in manufacturing and exports.

“This trend could stimulate localisation by domestic manufacturers, strengthen the real economy, and support Vietnam’s stock market,” the fund suggested. ”Although risks remain, the country’s robust economy and investor optimism indicate resilience amid potential challenges and shifts in global trade policy.”

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