"Made in China" Becomes "Made in Vietnam" || Peter Zeihan

Summary

Peter Zion discusses the strategic importance of Vietnam in the global trade landscape, especially as countries pivot away from China. Highlighting the growth of U.S.-Vietnam trade, Zion explains Vietnam's strengths, such as its proximity to China, a highly skilled workforce, and strong educational investment. He contrasts Vietnam’s manufacturing model with Mexico’s, pointing out the complementary nature of their industries. Zion also addresses the challenges of Chinese transshipment trade and the Trump administration’s approach to tariffs. While acknowledging the complexity of enforcement, he suggests a dual-tiered tariff system to tackle the issue effectively.

Takeaways

• 😀 Vietnam has become a key player in global trade, particularly for the U.S. as part of the China+1 and ABC (Anything But China) strategies.
• 😀 The Vietnam-U.S. trade relationship has grown rapidly since 2019, with Vietnam positioned as an attractive alternative to China for manufacturing.
• 😀 Vietnam's proximity to China and its focus on technical education, especially in STEM, make it an appealing manufacturing hub.
• 😀 Around 40% of Vietnam's college graduates are STEM graduates, contributing to a skilled workforce for technical manufacturing.
• 😀 Vietnam’s focus on high-value-added manufacturing, unlike China’s emphasis on intellectual property theft and rote memorization, has helped it leapfrog China technologically.
• 😀 While Vietnam and Mexico both play key roles in manufacturing, they have different economic structures and manufacturing strategies, with Mexico focusing on single-product industrial parks and Vietnam adopting multi-step manufacturing clusters.
• 😀 Mexican cities, unlike those in Vietnam, often operate independently, with no secondary manufacturing centers nearby, limiting cross-border product flow.
• 😀 Mexico’s approach, with more localized manufacturing, is seen as more resilient in a world with fewer global supply chains.
• 😀 Vietnam’s system is more dependent on global supply chains, which still positions it as an important player as China’s role weakens, but it has room for growth.
• 😀 The Trump administration is considering tariffs on Vietnamese goods, especially to address the issue of transshipment, where Chinese goods are funneled through Vietnam and labeled as made in Vietnam.
• 😀 Proposed tariffs could be as high as 20% for Vietnamese goods and 40% for transshipment goods, though the administration’s ability to implement such a system remains unclear due to lack of staffing and infrastructure.

Q & A

What was the significance of the July 9 deadline mentioned in the script?

The July 9 deadline marks the self-imposed cutoff for the Trump administration to set tariff levels for global trade. It signifies the restart of a tariff process that had initially begun with the trade disruptions in April 2022, affecting countries worldwide.

What is the 'China Plus One' strategy, and how does it relate to Vietnam?

The 'China Plus One' strategy involves companies diversifying their supply chains to reduce dependency on China by adding an alternative country to source products from. Vietnam is a top choice for this strategy due to its proximity to China and its growing manufacturing capabilities.

How has the Vietnam-U.S. trade relationship evolved from 2019 to 2025?

From 2019 to 2025, the U.S.-Vietnam trade relationship has seen rapid growth, particularly in manufacturing and technical fields, outpacing other countries outside of NAFTA in percentage terms.

What makes Vietnam an attractive manufacturing destination?

Vietnam is appealing due to its proximity to China, its large and skilled workforce (with 40% of college graduates in STEM), and its emphasis on high-value-added manufacturing and technology, positioning it as a strong competitor in the global supply chain.

How does Vietnam's educational system differ from China's, according to the script?

Vietnam’s educational system is focused on technical skills and high-value manufacturing, aiming to leapfrog China in technology, while China emphasizes white-collar work and intellectual property theft.

What is the primary difference between the manufacturing systems of Vietnam and Mexico?

Vietnam’s manufacturing system is more integrated, with hubs where different manufacturing steps can happen in one location. In contrast, Mexico’s manufacturing system is more decentralized, with each city focusing on a single product, making it less dependent on broader supply chains.

Why is Mexico’s manufacturing system seen as more self-sufficient?

Mexico's manufacturing system is self-sufficient because the cities involved in manufacturing are relatively isolated, with most of the production happening locally without relying on products from other regions. This model is increasingly beneficial in a world of supply chain disruptions.

What concerns are raised about Vietnam's role in transshipment trade?

Vietnam is sometimes used as a transshipment point for Chinese products, where goods are labeled as 'Made in Vietnam' after minimal processing and then exported to the U.S. This practice raises concerns about trade fairness and the potential to bypass tariffs.

What is the Trump administration’s stance on tariffs regarding Vietnam?

The Trump administration is considering a two-tiered tariff system, where products genuinely manufactured in Vietnam could be taxed at 20%, while transshipment goods (those originating in China but passing through Vietnam) would face a higher tariff of 40%. The goal is to break the link between the U.S. and China via tariffs.

Why might implementing these tariffs be challenging, according to the script?

Implementing these tariffs could be challenging due to a lack of infrastructure, staffing, and technology at U.S. customs. The process would require extensive categorization and handling of goods, which is complicated by the Trump administration's staffing issues.