The rise of middle power: How Vietnam manoeuvres trade in goods amid US-China rivalry
The rise of middle power: How Vietnam manoeuvres trade in goods amid US-China rivalry
#opinion
1. Introduction
The intensifying rivalry between the United States and China has become one of the most consequential forces shaping today’s international political economy. While it initially emerged as a trade war, the competition has expanded into a broader struggle over supply chains, market access, and economic influence.
For countries outside the great power core, particularly in Southeast Asia, this rivalry is not merely geopolitical, but it directly affects domestic growth, trade stability, and policy autonomy. Rather than fully aligning with either Washington or Beijing, many Southeast Asian states have pursued flexible strategies to protect their national interests. This pattern is often explained through middle power theory, which emphasises how states with moderate material capabilities seek influence not through coercion, but through strategic positioning, economic engagement, and diplomatic flexibility (Cooper, Higgott & Nossal, 1993). In an increasingly polarised environment, middle powers attempt to preserve autonomy by engaging multiple major powers while avoiding binding commitments. Vietnam represents one of the clearest examples of this behaviour.
As US-China rivalry increasingly unfolds through economic instruments, particularly trade policy, tariffs, and supply-chain restructuring, Vietnam has emerged as a key arena where this competition materialises. Its expanding manufacturing base, combined with deep economic ties to both the United States and China, places trade in goods at the centre of Vietnam’s strategic calculations. Economic relations are therefore not neutral transactions, but tools through which Vietnam navigates external pressure. This paper argues that Vietnam’s rise as a middle power can be understood through its strategic manoeuvring of trade in goods amid the US-China rivalry. Drawing on hedging theory, the analysis examines how Vietnam simultaneously deepens economic engagement with both powers while attempting to limit vulnerability and avoid overt alignment (Kuik, 2008; Goh, 2016). In doing so, the paper highlights both the opportunities and constraints faced by middle powers operating within an increasingly competitive global order.
2. Vietnam’s strategic balancing act in US-China rivalry
Vietnam is a particularly suitable case for examining middle power behaviour in Southeast Asia due to its economic growth, geopolitical position, and foreign policy orientation.
With a population of nearly 100 million and sustained expansion driven by export-oriented manufacturing, Vietnam has become one of the region’s most dynamic economies. Its strategic location along major maritime trade routes and its proximity to China further elevate its importance within regional supply chains.
From a middle power perspective, Vietnam possesses sufficient economic and strategic relevance to attract attention from major powers, yet lacks the capability to shape the international system independently. This structural position encourages the adoption of hedging strategies, defined as a mix of engagement, diversification, and limited balancing designed to manage uncertainty in a competitive great power environment (Kuik, 2008). Rather than choosing sides, hedging allows states to extract benefits from multiple relationships while minimising exposure to coercion. In recent years, Vietnam has gained increasing attention from the United States as part of Washington’s broader Indo-Pacific strategy, including the Pivot to Asia and the Free and Open Indo-Pacific (FOIP) framework. These initiatives emphasise economic cooperation, supply-chain diversification, and reduced reliance on China, positioning Vietnam as a key economic partner (Chaoying & Yilmaz, 2024). At the same time, Vietnam remains deeply integrated with China-centred production networks, relying heavily on Chinese imports for machinery, components, and raw materials essential to its export-led growth.
This dual dependence illustrates the practical logic of hedging. While the United States has become Vietnam’s largest export market, China continues to serve as its most important supplier.
Rather than fully aligning with either power, Vietnam has pursued diversification, selective concessions, and strategic ambiguity to manage these competing pressures. Its emphasis on independence, self-reliance, and non-alignment reflects an effort to preserve policy autonomy while remaining economically open.
3. Economic lens: Vietnam trade in goods with US and China
As the middle power in Southeast Asia, Vietnam has recently gained more attention as the central position in Washington’s East Asia strategy, creating significant policy measures, including the Pivot to Asia and Free and Open Indo-Pacific (FOIP), one of those focusing mainly on economic cooperation with Vietnam as a comprehensive method for competition with China (Chaoying & Yilmaz, 2024). During the second administration of Trump, the competition intensified, as Vietnam received more pressure from the US over the accusation of serving as a transshipment hub for Chinese rebranded products labelled “Made in Vietnam” with the intention of evading US tariffs. As a result, in April 2025, Vietnam faced a 46% on its exports (Tung, 2025). In this paper, we will examine the economic aspects of Vietnam amid the US-China power rivalry, particularly in the context of trade, analysing the strategic manoeuvring of a middle power through the lens of hedging theory.
In 2018, the US-China trade war began with the US claims of intellectual property theft, forced technology transfer, and trade imbalance, shifting the global economic evolution. The conflict led to the imposition of more than $360 billion of tariffs on Chinese goods, and the escalation of protectionist policies that disrupted the global supply chains and investment flow across borders (Toai, 2025). Vietnam responded strategically to the tariffs, with General Secretary To Lam personally calling President Donald Trump on April 4, pledging to eliminate tariffs on American goods and urging reciprocal treatment, thus becoming the first country to reach a preliminary trade deal with the United States by July 2025. This lowered tariffs on most Vietnamese goods to 20%, maintained a 40% rate on transshipped items (mainly of Chinese origin), and secured zero tariffs for US exports to Vietnam (Tung, 2025).
With the hedging policy, Vietnam reinforced positive trade relations with the US, which remained Vietnam’s largest export market, taking over 30% of the country’s shipments. Vietnamese exports to the US hit a record $126 billion in the first 10 months of 2025, increasing 28% year-on-year, exceeding full-year 2024, driven by textile and electronic products (Sharma, 2025). Although production in Vietnam has significantly scaled up, it still has a limited solid base of local suppliers for components, machinery, and raw materials, making the country heavily reliant on on others to supply factories and sustain growth. China has become Vietnam’s top supplier, accounting for $144.5 billion worth of goods in 2024 alone, up from about $65.44 billion the year before. Chinese value-added content in Vietnamese exports rose from 0.4% in 1995 to 13.8% in 2018 (Bonet, 2025). According to the Office of the US Trade Representative, US goods trade with Vietnam stood at $149.6 billion in 2024, while US exports to Vietnam totalled $13.1 billion, representing a 32.9% increase of $3.2 billion compared to 2023 (Sharma, 2025).
Overall, Vietnam’s ties with both countries are highly complicated, involving a historical dispute over the South China Sea and the balancing of power within the arena of major power rivalry, which Vietnam chose to navigate through hedging strategies.
4. Counterargument to Vietnam’s strategic manouevring
Although Vietnam’s tactical movements within the US-China rivalry are accurately described through trade in goods with the US and China, they may overstate the sustainability and agency inherent in its “hedging” strategy. However, the counter argument suggests that Vietnam is increasingly trapped in a cycle of asymmetric dependencies that render genuine strategic autonomy illegitimate and expose the country to major economic and political risks. This analysis utilises a critical political economy perspective to challenge two significant misconceptions: the structural dependency trap and the feasibility of maintaining a non-aligned security stance.
Due to the twofold dependency brought about by economic integration, Vietnam’s actual strategic autonomy is severely limited, making hedging more of a forced necessity than a wise decision. Its reliance on essential imports from China to support its manufacturing-export model, which caters primarily to the US market, leaves it vulnerable to pressure from both countries. This was evident in April 2025, when the US threatened Vietnam with a 46% tariff, accusing it of transshipping Chinese goods. Following rapid negotiations, Vietnam secured a deal by July 2025, which included a reduced tariff but established a 40% tariff on items of Chinese origin, alongside a commitment to increase US imports (Alfaro and Chor, 2025). For this reason, Vietnam did not have any power, since its answer was not a strategic move but a forced concession. Additionally, this incident demonstrated how its “hedging” method fails under pressure, showing the trap of reducing one power necessitates acts that could bother the other, on whom it also depends.
The unsustainability of “non-alignment” is reflected in the impending security crisis. Vietnam’s “Four Nos” defence policy is portrayed as the foundation of the country’s independent security stance, while in practice, this policy has become a strategic illusion as a result of China’s continuous aggression in the South China Sea (Yazhen, 2022). Moreover, Vietnam has engaged in a de facto security alignment with the United States, Japan, and India, with modern weaponry exports, regular strategic port visits by US aircraft carriers, and expanding intelligence coast guard cooperation (Grossman and Orner, 2021). With this position Vietnam faces a critical decision regarding its sovereignty in the South China Sea, as the instability of its current position may lead to a choice between accepting Chinese dominance or seeking external security support, thus undermining its non-aligned stance.
Currently, Vietnam strategy of “coalitional diplomacy,” which involves forming security partnerships with middle power and the US, is not merely a defensive measure but a clear preparation for an alternative approach (Bui, 2023). The state is therefore edging closer to a secret alliance it publicly rejects, underlining the profound mismatch between its ideological posture and its real, survival-driven calculus.
The celebrated “manoeuvring” is a reactive, elite-focused initiative aimed at maintaining regime legitimacy and avoiding crisis rather than a comprehensive strategy for sovereign development. As the rivalry between the US and China escalates across military, technological, and ideological domains, Vietnam’s future could be influenced more by the actions of these great powers than by its own strategies, highlighting the fragile situation of smaller nations in the midst of imperial forces.
The authors are senior students majoring in international relations at the Institute for International Studies and Public Policy, Royal University of Phnom Penh.
-Khmer Times-
