China the target in US-Vietnam trade deal

Nick Beams

The agreement reached by the US and Vietnam on “reciprocal tariffs” announced on Wednesday underscores the nature of Trump’s economic war against the world. It is aimed at establishing a global economic dictatorship directed against China, whose rise the US regards as an existential threat.

Under the deal, goods deemed to be of Vietnamese origin will receive a tariff of 20 percent while those designated to have been “transhipped”—that is primarily originating from China—be taxed at 40 percent, just below the initial 46 percent reciprocal tariff threatened against Vietnam on April 2.

Containers are loaded on a ship at the Saigon port in Ho Chi Minh City, Vietnam on May 3, 2020. [AP Photo/Hau Dinh]

This stipulation sets up an economic minefield for Vietnam and other countries whose economies are part of global supply chains. Items may have components and raw materials originating in China, but are then manufactured or assembled for export to the US and other markets.

How exactly the distinction between a primarily Vietnamese-made item and one that is being “transhipped” has not been spelt out. But it will be largely, if not entirely, determined by the US.

Responding to the US-Vietnam agreement, the Chinese commerce ministry said it was “conducting an assessment” of the deal.

“We firmly oppose any party striking a deal at the expense of China’s interests. If such a situation arises, China will take resolute countermeasures to safeguard its legitimate rights and interests,” it said.

Others have already pointed to the essential content of the deal. In comments to the Financial Times, Julien Chaisse, an international law academic in Hong Kong said: “The new US-Vietnam deal is not just about trade; it is clearly aimed at China… it’s meant to block the flow of Chinese goods that often move through Vietnam to dodge existing US duties.

“This fits a much wider trend: the US is lining up bilateral deals with countries near China to tighten economic co-operation and, at the same time, [make] it harder for Beijing to strengthen its supply chain influence.”

Vietnam’s official state media reported that the head of the country’s ruling Communist Party, President To Lam, had a phone call with Trump on Tuesday. The two sides had reached a consensus in a “fair and balanced reciprocal trade agreement framework.”

It was anything but that. Vietnam had a gun held at its head, with the threat that a 46 percent tariff if it did not capitulate would devastate its economy. Bloomberg economists have estimated that even the lower 20 percent tariff could lead to a 25 percent fall in Vietnamese exports to the US, and a possible 2 percent cut in its growth rate.

The US market comprises 30 percent of Vietnam’s exports. Since 2018, Vietnam’s exports to the US have increased from under $50 billion to $137 billion in 2024. Much of this increase was a result of the tariffs against China during the first Trump administration as companies moved operations to Vietnam.

Over the same period US exports to Vietnam have risen from less than $10 billion to just over $13 billion. This has led to a widening trade gap, resulting in it having the third largest trade deficit with the US—more than $123 billion last year.

In typical fashion, Trump used Orwellian language—where words have their opposite meaning—to describe the deal.

“It will be a Great Deal of Cooperation between our two Countries,” he wrote on his social media.

Having imposed major tariffs on the US side, Trump secured agreement from Vietnam that all American goods entering the country would be duty free.

Hailing this decision in a delusional manner, Trump declared: “It is my opinion that the SUV or, as it is sometimes referred to, Large Engine Vehicle, which does so well in the United States, will be a wonderful addition to the various product lines within Vietnam.”

A government survey in Vietnam earlier this year found that only 9 percent of Vietnamese households own a car with most people using motorcycles and motorbikes as their mode of transportation.

The Vietnamese News Agency reported that the president had asked Trump that the US recognise Vietnam as a market economy, which would remove restrictions on its import of high-tech products. This has been a longstanding demand of Hanoi which Washington has consistently dismissed , with no sign of movement on this occasion.

The so-called “deal” has more the character of the unequal treaties imposed on colonies in the heyday of imperialist rule in the late 19th and early 20th centuries than any genuine trade negotiation. Its implications go far beyond Vietnam.

It will be the template for the agreements that the US attempts to impose on other countries, whether they be advanced or less developed economies, above all to disrupt supply lines originating in China.

India, which is reported to be close to securing a framework deal with the US, has been in discussion over what “rules of origin” will apply. According to a report on Bloomberg, Washington has stipulated that to qualify as “Made in India” at least 60 percent of the value added must be locally based. India has pushed for this level to be 35 percent.

The issue is certain to be at the centre of US negotiations with other countries.

In a recent report cited by Bloomberg, Alicia Garcia Herrero, Asia-Pacific chief economist at the financial firms Natixis, said: “Asia’s dilemma when it comes to Trump’s trade war is all about dependence on US final demand while relying on China’s value-added in domestic production.” Vietnam, Cambodia and Taiwan are among the most exposed.

The trade war has a significant military component. It is aimed at forcing those countries, particularly in Asia, which have been seeking to strategically balance between Washington and Beijing, to get off the fence and more directly align themselves with the US preparations for war against China.

This is clearly recognised in Beijing, and it may well respond.

Bloomberg economist Rana Sajedi noted: “The looming question now is how China will respond. Beijing has made clear that it would respond to deals that come at the expense of Chinese interests and the decision to agree to higher tariffs on goods deemed to be ‘transhipped’ through Vietnam may fall in that category.”

On the other hand, it may decide to stay its hand, not wishing to upset the delicate strategical balance in southeast Asia. In any case, the issue is going to arise again because the US is pushing for anti-China measures to be included in any agreements with the European powers.

Such measures were part of the agreement with the UK in May. It included supply chain security requirements that sectors such as steel, pharmaceutical and aerospace are not sourced from or reliant on Chinese inputs.

The deal committed the UK and the US to enhanced cooperation on investment security and export controls. It stipulated that there be coordinated action to address “non-market policies of third countries”—a code phrase for China.

It also made clear that tariff reductions in UK exports such as cars and metals were conditional on compliance with US national security requirements. Such stipulations will not stop at the UK.

Thai prime minister suspended from office

Ben McGrath

Thailand’s Prime Minister Paetongtarn Shinawatra leaves Government House in Bangkok, Thailand, Tuesday, July 1, 2025 [AP Photo/Sakchai Lalit]

Thailand’s Constitutional Court suspended Prime Minister Paetongtarn Shinawatra of the Pheu Thai Party (PT) from office on Tuesday pending a final ruling on a petition claiming she is unfit for office. The nine-member court ruled unanimously to review the petition while voting seven to two in favor of suspending her from office.

A final ruling on Paetongtarn’s case could take one to three months. If the accusations against her are accepted, she would be the second Pheu Thai prime minister deposed by the court in the last two years. Srettha Thavisin was removed on trumped-up ethics charges last August.

The claims against Paetongtarn stem from a phone call with Cambodia’s former long-time prime minister Hun Sen, leaked on June 18. The two discussed a border dispute that led to a military clash between Thailand and Cambodia on May 28 that led to the death of a Cambodian soldier. Paetongtarn’s opponents claimed she had made Thailand look weak and moved against her to carry out what is in essence a judicial coup.

Thirty-six senators led by Thai senate president Mongkol Surasajja submitted the petition to the Constitutional Court, a body appointed by the military after it seized power in 2014. Mongkol is part of the leading section of the National Assembly’s upper house known as the “blue faction,” which has close ties with the right-wing Bhumjaithai Party (BJT). The BJT left the ruling coalition, taking 69 seats and leaving the Pheu Thai-led government, with a slim majority in the 500-seat lower house of the National Assembly.

The political stage for the court ruling was set by a large right-wing patriotic protest in Bangkok by the so-called Yellow Shirts—supporters of the country’s traditional elites, the monarchy, the army and state bureaucracy, including the courts. The protesters demanded Paetongtarn’s resignation and for all coalition partners to abandon the government.

Yellow Shirt leader, and media mogul Sondhi Limthongkul openly suggested that the armed forces seize power, telling those assembled that while he did not want to see another coup, he “won’t object if the military does something.” Limthongkul and the Yellow Shirts were instrumental in whipping up protests that preceded the 2006 military coup against Thaksin Shinawatra, Paetongtarn’s father and Pheu Thai leader.

The political crisis unfolding in Thailand is not the result of a phone call. Rather the bitter factional infighting reflects sharp tensions within the ruling class, amid declining economic growth and worsening geo-political conflict. Thailand faces the prospect that Trump will next week impose his threatened 36 percent tariff on Thai exports to the US.

Pheu Thai came to power through an unstable coalition of right-wing parties following the May 2023 general election, only the second since the 2014 coup that ousted the Pheu Thai government of Thaksin’s sister, Yingluck Shinawatra. While the military outright rigged the 2019 election, it took a more cautious approach two years ago, not wanting to spark a renewal of the mass student-led protests that began in 2020.

Through its control of the senate and in alliance with parties like the BJT, the military blocked the election winner, the so-called “progressive” Move Forward Party (MFP). While this party offered very limited reforms, even this was too much for the military. The Constitutional Court barred the MFP leader from standing for prime minister.

Pheu Thai formed an inherently unstable coalition government with military-aligned parties—the United Thai Nation Party and the junta’s Palang Pracharath Party (PPRP)—as well as the right-wing BJT. The PPRP was replaced in the coalition by another right-wing party, the Democrat Party, last August.

As part of this deal, Thaksin Shinawatra, was also allowed to return to Thailand in 2023 after years of self-imposed exile. The ruling class intended to keep Thaksin on a short leash while hoping he would use his influence to mollify anger among Thailand’s rural poor.

With the prospect of being jailed on bogus corruption charges, Thaksin fled the country after the 2006 coup. This sentence was reduced to one year, of which Thaksin served six months while staying in a hospital after his return.

Thaksin currently faces additional criminal charges and investigations, including charges of lèse-majesté stemming from comments he made in a 2015 interview with the South Korean newspaper, Chosun Ilbo. He appeared in court for a hearing on the charges the same day Paetongtarn was suspended from office. Conviction of lèse-majesté carries penalties of up to 15 years in jail.

Pheu Thai has not opposed any of these anti-democratic measures. It is far more fearful of triggering mass opposition, particularly in the working class, than it is of the military and its political allies.

Similarly the MFP refused to defend itself when the Constitutional Court dissolved the party last August. The party’s founder, wealthy businessman Thanathorn Juangroongruangkit, who had appealed to young people in particular on the basis of defending democratic rights, simply told party members and supporters to “just shrug and move forward.” The party was reestablished as the People’s Party (PP), which is currently the main parliamentary opposition party.

Far from opposing suspension of Paetongtarn, the PP openly supports it on the basis of the same reactionary patriotic basis as the Yellow Shirts. Party leader Natthaphong Ruengpanyawut declared on June 19 that Paetongtarn’s phone call with Hun Sen “has completely destroyed public trust in the government.”

While calling for new elections, the PP is openly colluding with the right-wing Bhumjaithai Party, having entered into negotiations to support its head Anutin Charnvirakul for prime minister if the latter backs constitutional reforms. The BJT, the very party now at the forefront of the latest judicial coup in alliance with the military, also played a crucial role in blocking the MFP from forming a government in 2023.

A sharp warning on the state of the global economy

Nick Beams

Bank for International Settlements in Basel, Switzerland [Photo by Wladyslaw Sojka (Free Art License 1.3)]

In its annual report, the Bank for International Settlements (BIS), the umbrella organisation for central banks, has painted a picture of a world economy and financial system, increasingly fractured, full of contradiction, conflicts and vulnerabilities, amid a long-term global slowdown.

The report contrasted markedly with the relatively upbeat report presented year ago.

According to this year’s assessment: “The prospects for the global economy have become much more uncertain and unpredictable in recent months, marking a notable departure from the relative optimism of the previous year when a soft landing was in sight. Trade disruptions now threaten to reshape the global landscape, as long-standing political and economic relations are being questioned,” according to the opening sentences of chapter one of the report issued on Sunday.

The immediate focus is on US trade policy and the disruption of the Trump tariffs, with their “unknown eventual scope and impact.” These have “elevated measures of economic uncertainty to levels typically associated with crises and sparked high volatility in financial markets.”

Even before the Trump economic war, however, the world was “already grappling with significant vulnerabilities.”

These are rooted in the very foundations of the global economy which the report noted in the introduction “is facing long-standing and emerging challenges. Productivity growth has been trending down in many advanced economies for decades and more recently in several emerging market economies, acting as a drag on overall economic growth.”

Economies have become more vulnerable to inflation because of ageing populations and emerging labour shortages with trade fragmentation which “could further reduce supply flexibility.”

On top of this, “high public debt in several jurisdictions makes the financial system vulnerable to interest rate rises, while reducing governments’ ability to respond to adverse developments.”

The use of the world “several” represents a significant underestimation of the situation as the growing debt crisis is concentrated in the major economies. 

The US has a debt of $36 trillion, rising at what is universally characterised as an “unsustainable” rate. In the UK, which experienced a major crisis in 2022, there have been warnings of a bond market sell-off because of the high levels of debt. European countries, particularly France and Italy, are weighed down in debt, while the Japanese prime minister has likened the government’s financial position to that of Greece in the 2010s. 

The report said that while higher public debt levels are “sustainable in the presence of strong income growth and low interest rates, current and future conditions look less than favourable.” 

Again, that is something of an understatement for as the report itself continued, “economic growth is expected to remain subdued for the foreseeable future” and interest rates “may not return to the low levels observed in the pre-pandemic decade.” 

These mounting problems are compounded by major changes in financial markets flowing from the rise of private credit—so-called non-bank financial institutions (NBFIs). Their increased use in the financing of public debt “has heightened liquidity risks in bond markets, raising the potential for financial stability risks to emerge outside the traditional banking systems.”

Elaborating on these risks, the report noted that “a growing share of long-term credit to small or medium-sized and highly indebted companies is provided by private credit funds,” which are in turn funded by pension funds and insurance companies. The connections in this form of funding are “notoriously opaque.” 

The overall result is that “financial conditions as well as financial stability risks are increasingly influenced by players outside the traditional banking system.” But the banks are ultimately involved because of the support they provide to the private markets.

The financial crisis of 2008, the report said, was primarily a banking crisis with mortgage markets at its core. But today the landscape has “government bond markets at its centre and asset managers of various stripes as the key intermediaries.”

This is particularly the case in the repo, or repurchase, market where hedge funds use government bonds as collateral in very short-term borrowing from banks to finance highly leveraged trades.

“By using government securities as collateral in the repo markets to borrow cash for additional securities, these strategies boost returns but are also vulnerable to adverse shocks in funding, cash or derivative markets. This vulnerability has increased further as financing terms have become increasingly lax.”

Creditors, the report found, have “stopped imposing any meaningful restraint on hedge fund leverage.”

This leaves the broader market more vulnerable to disruptions because “even slight increases in haircuts [losses] can trigger forced selling and amplify financial instability”. That was evident both in the market turmoil in March 2020, at the start of the pandemic and in turbulence of April this year.

In response to the unexpected size of Trump’s “reciprocal tariffs” on “liberation day,” April 2, interest rates on government bonds spiked. But contrary to what normally takes place, the US dollar fell in international currency markets and for some days the market mantra was “sell America.”

The report pointed to the complex effects of tariff hikes in the conditions which now prevail.

“The global economy is not a collection of islands; it consists of a dense web of interconnections among suppliers, customers, consumers and the financial intermediaries that knit them together. Activity straddles the border, so that traded goods undergo many rounds of value added before finding their eventual customers.”

And the disruption of supply chains would again lead to “upside surprises in inflation.” 

The issue of inflation raises before the BIS and all central banks—the guardians of the interests of finance capital—one of the issues of greatest concern, namely the response of the working class.

The report itself used carefully guarded language saying that “households … may show less tolerance for real wage declines following the sharp rise in living costs after the pandemic.”

In his remarks on the report, BIS managing director Agustin Carstens was a little more direct.

“If evidence of de-anchoring [a code word for a rise in workers’ wages struggles because of the expectation of further price hikes] emerges, central banks must respond forcefully to inflationary shocks.” 

That means interest rates must be lifted even if that pushes the economy into recession. In fact, the BIS report looked on such a development positively in regards to inflation, saying a global slowdown could be a mitigating factor in its development.

The BIS also bared its class teeth when it came to deal with the general slowdown and the growing fiscal crisis, reflected in the escalation of government debt.

It insisted that so-called “structural reforms” were the key to addressing the persistent challenges of low economic and productivity growth experienced by many economies in recent decades” and that such reforms were the only means to overcome this.

“Neither expansionary monetary policy nor expansionary fiscal policy can act as a lasting driver of long-term growth.”

In the capitalist economy, where “productivity” is ultimately based on the rate at which surplus value, the basis of profit, can be extracted from the working class, “structural reform” comes down to the reduction of the labour share of national income and the worsening of working conditions.

The same class dynamic was seen in BIS’s prescriptions for the reduction of government debt which it identified as the source of financial instability.

It said countries facing “large fiscal deficits and limited fiscal space must pursue fiscal consolidation.” But it ruled out achieving that by increased taxation on corporations and the wealthy saying that “relying heavily on tax-based consolidation could hinder growth further.”

Under conditions where all governments are increasing spending on the military to their highest levels in the post-war period, “fiscal consolidation” means deepening attacks on social services such as health, education and pensions, which in turn impacts on the working class, well beyond the levels already carried out.

The BIS report is a warning both as to the depth and growing intensity of the crisis of the global capitalist economy and the response of the ruling class and its state agencies to it.

Thai government on brink of collapse

Robert Campion

Thailand’s coalition government of Prime Minister Paetongtarn Shinawatra is on the verge of collapse following a leaked phone call between Paetongtarn and former Cambodian leader Hun Sen. The call took place on June 15 and was made public three days later. It dealt with the growing tensions between the two countries over a border dispute that sharply escalated last month.

Thailand‘s Prime Minister Paetongtarn Shinawatra, centre, arrives at Government House for cabinet meeting in Bangkok, February 4, 2025. [AP Photo/Sakchai Lalit]

The call was recorded and leaked by Hun Sen, who was prime minister of Cambodia from 1985 to 2023. Though he has passed on the premiership to his son, Hun Sen remains president of Cambodia’s senate and continues to carry considerable influence.

Since the May 28 border clash that led to the death of a Cambodian soldier, tensions have grown as both sides militarily reinforced the border and restricted crossings and trade, raising the potential for further escalation.

The two countries have a long-running border dispute dating back to 1907 and the French mapping of the region when France controlled Cambodia as a colony. While Thailand was never colonized, it had been forced to surrender significant territory to France. To date, approximately 195 kilometers of the 798-kilometer Thai-Cambodian border has still not been demarcated. Armed clashes also took place in 2011.

In the call, Paetongtarn addressed Hun Sen deferentially as “uncle,” which her political opponents seized upon to claim she made Thailand look weak. Right-wing and military circles also accused Paetongtarn of undermining Lieutenant General Boonsin Padklang, the commander of Thailand’s Second Army Area responsible for the border with Cambodia. The general has been whipping up nationalist sentiment since the border clash occurred.

Paetongtarn told Hun Sen that Boonsin was “playing tough.” She dismissed his hardline stance as simply “wanting to look cool and saying things that are not useful to the nation, but in truth what we want is peace.”

After the phone call was made public, the conservative Bhumjaithai Party, with its 69 seats, withdrew from the ruling coalition, which is led by Paetongtarn’s Pheu Thai Party. The coalition now holds a slim majority of 260 seats in the 500-seat lower house of the National Assembly. Some leading members of the United Thai Nation Party, now the second-largest partner with 36 seats, are demanding Paetongtarn’s resignation as a condition for remaining in the coalition, which she has so far refused to do.

If the ruling coalition loses its parliamentary majority, Paetongtarn could remain in power. However, her government’s ability to pass legislation would be sharply curtailed, practically necessitating her resignation.

The main opposition People’s Party has called for the dissolution of parliament and a new general election, saying it is necessary to prevent a coup. Army head General Pana Klaewplodthuk claimed that the military was committed to “democracy” and that the armed forces would continue to operate within “existing mechanisms.”

This is no guarantee a coup will not occur, especially in a country that has experienced two in the present century alone. Anti-government protests have taken place, with more planned. The military could use these demonstrations or the overall instability in the government to carry out a coup under the pretext of restoring order.

The factional warfare among the Thai ruling class now erupting to the surface is not the result of a diplomatically embarrassing phone call. It has been ongoing behind the scenes for months and has already claimed one Pheu Thai prime minister. Srettha Thavisin was removed from office on trumped up ethics charges last August. It is an expression of the profound contradictions gripping not only Thailand but the entire region, under the impact of the crisis of global capitalism and escalating US-instigated wars in Ukraine and the Middle East.

Washington is escalating its preparations across the Indo-Pacific region for war against China and is applying pressure on countries like Thailand to line up with its military plans, including through Trump’s “reciprocal” tariffs. Thailand faces a potential rate of 36 percent when the tariffs are set to take effect on July 9 if a trade deal is not worked out.

These negotiations are critical for Thailand’s economic stability. In 2024, Thailand exported $63.3 billion worth of goods to the US. But Washington’s attempt to coerce Thailand is driving the tensions in Bangkok. China is Thailand’s largest trading partner and one of its largest foreign investors. There are factions within the Thai ruling class, including inside the military, that favor friendly relations with Beijing.

Between 2016 and 2022 under the military junta that seized power in the 2014 coup, Thailand purchased $394 million worth of weaponry from China, compared to $207 million from the US.

The Trump administration is exploiting trade talks with Thailand and other countries such as Vietnam and Indonesia to bully them to line up against China. Washington is demanding Bangkok purchase US military equipment such as 130 Stryker armored vehicles and other weaponry.

Thailand is also the oldest US military ally in Asia. It played a major role in the Vietnam war, providing approximately 40,000 troops and major air bases from which US aircraft launched bombing missions over North Vietnam, Laos, and Cambodia. Washington no doubt hopes Thailand would play a similar role in a war against China. Today, Thailand alongside the US also hosts Cobra Gold, the largest annual multinational military exercises in the Indo-Pacific region.

Additionally, the Thai ruling class is deeply concerned that the crisis of capitalism will ignite an eruption of working-class struggle that Paetongtarn and Pheu Thai will be unable to contain. Thailand’s GDP grew only 2.5 percent in 2024, roughly half the average growth of other countries in the region. Without a tariff deal, financial analysts are predicting this could drop to only 1 percent this year.

According to Thailand’s Kasikorn Research Center (KResearch), more factories will close in 2025 than in the last two years, during which there was an average net loss of 53 factories per month. These closures have been particularly prevalent in sectors like electronics, automotive, and food processing, which are heavily reliant on exports to the US.

Thailand’s automotive industry, the 10th largest in the world, saw car sales contract by one percent in the first half of this year, with the expectation that they will decline another 1.7 percent in the second half of the year according to KResearch. Overall, domestic car production is expected to fall by 6 percent for 2025.

Consumer confidence fell to 54.2 on the Consumer Confidence Index in May according to the University of the Thai Chamber of Commerce, the lowest level since March 2023. A score lower than 100 indicates general pessimism with the state of the economy while a score greater than 100 indicates optimism.

Thai credit growth is also turning negative for the first time since the 2008 global financial crisis, with a forecast by KResearch of –0.6 per cent for 2025. Non-performing loans (those which default on their payments), are set to rise from 2.7 percent to 3 percent.

The Thai ruling class is turning to nationalism and militarism in order to project these mounting internal tensions outwards against an external enemy. Whether Paetongtarn’s government falls remains to be seen, but no section of the ruling class has a progressive solution to the worsening crises facing the working class.