Vietnam Remains Caught in the Crossfire of Major Powers' Struggle for Influence

New spin on an Old Story:

Half a century since the fall of Saigon, Vietnam finds itself caught up once more in tangled conflicts and power struggles among global powers.

Remember the day when he was atop the poster held by Donald Trump in the White House's Rose Garden? That was the "day of liberation," as the president called it, announcing tariff countermeasures against nations accused of unfair trade practices. Europe and Japan were threatened with tariffs of 20% and 24%, respectively, but Vietnam faced new tariffs of 46%, just slightly lower than those set for its Indochinese neighbors, Laos (48%) and Cambodia (49%).

So why pick on little old Vietnam? As Christopher Goscha, a University of Quebec in Montreal history professor put it, "Indochina has always been a crossroads where major powers have met and wanted to control." Sandwiched between India and China, along the Pacific and Indian Oceans, the region's strategic position has made it a prized target for centuries.

Before the Industrial Revolution, China and India ruled the roost. When Japan sought to expand its empire during World War II, Vietnam was a prime target. Even the French, before and after, wanted to maintain their colonial grip on Vietnam, pushing for national independence through force if necessary. The United States stepped in to preserve their influence in the Pacific, but initially as a means of containing the spread of Chinese and Soviet communism in what would become their "Vietnam War."

Now, Vietnam faces fresh challenges. The division that split the country during and after the war still lingers, as Christopher Goscha explains. "Even today, there's a tendency to forget this ideological divide that split the country, often even within families. Yes, it was a war of national liberation, but also a civil war, which the Vietnamese regime doesn't want to talk about, but whose wounds have not all healed in Vietnam and among the diaspora abroad."

This rift played a part in the exodus of around 2 million Vietnamese and other Indochinese, many of whom lost their lives at sea or found refuge in the United States, France, or Canada. The loss, chaos, and destruction wrought by the Vietnam War also affected its Cambodian, Laotian, and Thai neighbors.

A Torn Nation

Vietnam emerged from three decades of war, severely damaged. Reconstruction was a tough challenge, as Gabriel Fauveaud, a University of Montreal geography professor explains. Reconstuction was complicated by the North's centrally planned economy model not fitting well with the needs of the South, and the country being split between those who won the war and those who lost it.

Christopher Goscha agrees. "To this day, it's easy to forget about the ideological divide that split the country, which is still evident even within families. Yes, it was a war of national liberation, but also a civil war, one that the Vietnamese government would rather not talk about, but whose wounds have not all healed in Vietnam and among the diaspora abroad."

A Region in Need of Rebuilding

The reconstruction of Vietnam took a new direction at the end of the 1980s, when the communist regime began to liberalize the economy, akin to what China did a few years earlier. This process was further accelerated after the collapse of the Soviet ally at the start of the 1990s and with the advent of globalization.

Like China, Vietnam utilized its cheap labor to manufacture low-value goods, such as clothing, sports equipment, and furniture, for foreign companies, mostly Chinese. Over time, the industry moved up the value chain, producing electronic devices, solar panels, automobiles, and other higher-value goods. Like other countries in the region, Vietnam shifted from an agricultural economy to one heavily dependent on manufactured exports and foreign investment.

This economic transformation has only accelerated in recent years, as certain countries have sought to distance themselves from China, and Vietnam has appeared as a promising alternative or intermediary in the region. As a result, Vietnam now finds that about one-third of its imports come from China, and exports to the United States account for a quarter of its GDP.

Trump's Tariffs and Their Impact

This arrangement is what Donald Trump is currently, consciously or not, challenging. Trump's tariff threats, according to Gabriel Fauveaud, not only pose a threat to the economic development of the region but also two decades of improved diplomatic and economic relations between the United States and Vietnam. All US Presidents since Bill Clinton have sought to strengthen these ties as a means to assert American presence in a rapidly developing region and counterbalance China.

"With his tariff threats against Vietnam and other countries in the region, Donald Trump is not only compromising the economic development of the region, but also 20 years of this new American policy of containment," observes Gabriel Fauveaud.

Once again, Vietnam finds itself standing at a crossroads, balancing its diplomatic and economic ties with both China and the United States. And as Gabriel Fauveaud notes, "This is known as 'bamboo diplomacy' in the region. It involves trying to orient oneself between major powers to get the best outcome without incurring the wrath of one or the other. It's very difficult to do, and it hasn't always gone well."

Additional Notes

Vietnam's GDP grew by nearly 7% in Q1 2025, but this represented a slowdown compared to the previous quarter
The World Bank projected a 5.8% growth rate for the full year due to trade policy uncertainty
Private analysts forecasted a 6% growth rate, assuming the US imposes additional tariffs
The U.S. is Vietnam's largest export destination, accounting for around 30% of exports
Tariffs already imposed on select Vietnamese goods total 10%
There are concerns that a pause on reciprocal tariffs, which could amount to additional tariffs of 36 percentage points, could further strain export-driven sectors
Vietnam's banking sector shows signs of vulnerability, with loan-loss coverage ratios having halved since 2022
The Vietnamese government faces pressure to address fiscal inefficiencies and banking vulnerabilities to maintain stability
Vietnam's poverty rate is expected to decline to 3.6% in 2025, while inflation is projected at 4% for the year

Further Analysis

The economic challenges facing Vietnam in 2025 point to its high exposure to global trade dynamics and its need to manage external shocks, while addressing fiscal inefficiencies at home. As a growing player in the global market, Vietnam must strike a delicate balance in maintaining diplomatic ties with both the United States and China while pursuing domestic reforms to sustain economic growth.

The ongoing tariff dispute between the United States and various nations, including Vietnam, has resurfaced old dynamics in Indochina, with Vietnam being positioned as a focal point once again.
Christopher Goscha, a history professor from the University of Quebec in Montreal, highlights that Indochina's strategic position has long made it a target for major global powers seeking to control it.
As the Vietnam War showed, military conflicts and political struggles have had profound and lasting effects on the region, leaving lingering wounds that continue to be felt in Vietnam and among the diaspora abroad.
Despite the economic growth seen in Vietnam, trade policy uncertainties and renewed tariff threats pose threats to the country's export-driven sectors, particularly those relying on the US market.
In the face of economic challenges and the need for diplomatic balancing, Vietnam's banking sector shows signs of vulnerability, with loan-loss coverage ratios having decreased significantly since 2022.
Against this backdrop, the Vietnamese government faces mounting pressure to address fiscal inefficiencies, maintain banking stability, and alleviate poverty, all while navigating complex geopolitical environments influenced by war-and-conflicts, policy-and-legislation, politics, and general-news.

Vietnam Remains Caught in the Crossfire of Major Powers' Struggle for Influence