The Morning: The unintended effects of tariffs

Plus, a Trump press conference, a shooting in Wisconsin and drugmakers.

View in browser|nytimes.com December 17, 2024 Good morning. Today, my colleague Damien Cave analyzes the unintended consequences of tariffs. We're also covering a Trump press conference, a shooting in Wisconsin and drugmakers. —David Leonhardt In Haiphong, Vietnam. Linh Pham for The New York Times Tariff fallout By Damien Cave I cover shifting power dynamics in Asia. Donald Trump promises to impose big tariffs on Chinese products. The last time he did that, in 2018, he made at least one country boom: Vietnam. Since it suddenly cost more to export things from China, businesses moved across the border. Especially in northern Vietnam, factories have replaced rice fields, growth rates have stayed in double-digits and exports to the United States have surged. For the first time since the 1800s, the region — once poverty-stricken — is now the country's main economic engine. Northern Vietnam's rise is an example of the unintended consequences of a trade war: The biggest benefits often emerge outside the countries engaged in the dispute. In today's newsletter, I'll explain three aspects of our new and unpredictable economic age. Industrial dispersion Northern Vietnam's boom shows that tariffs on one country tend to spread industrialization to others nearby. I recently visited Haiphong, the main port city in the north. I wrote a story that The Times published today about how its export boom is hard to miss, with cranes swinging overhead and trucks rattling down new highways. Companies like LG (of South Korea) and Pegatron (a Taiwanese supplier for Apple and Microsoft) have built factories that employ tens of thousands of workers earning about $500 a month. Many exporters relocated quickly to Vietnam, one economist told me, because they preferred to be out of China but close to Chinese suppliers. This reduced U.S. dependence on China and roughly tripled America's trade deficit with Vietnam. Only China and Mexico now have larger trade imbalances with the United States, selling far more to America than they buy. Source: Bureau of Economic Analysis | Data is only deficits on goods. | By Ashley Wu Vietnam's rise in the rankings could make it another tariff target for Trump. He tends to see such trade disparities as a sign that America is losing power and jobs while other countries are winning. For supporters, tariffs help bring manufacturing back to America. But punishing Vietnam would probably just create more movement, and not necessarily to the United States, where labor and supply networks — especially for electronics — are less robust than in many parts of Asia. With concerns rising about punitive measures from Washington, some companies in Vietnam are already exploring expansion plans in Cambodia, India and Malaysia. Geopolitics also matter Vietnam's boom looks far less threatening to Washington if the country is seen as a check on Chinese dominance. But if Trump sees it as a Chinese ally, sharing Communist Party values, he'll likely treat it as a competitive threat. It's not clear which view Trump will favor, but President Biden visited Hanoi last year and designated the alliance as a "strategic partnership," in part to recognize the country's nuanced role. Vietnam counters China in the disputed waters of the South China Sea by building island outposts and challenging Chinese claims to vital trade routes. Many countries signed on to receive loans from China's global infrastructure program, but Vietnam — wary of Chinese influence and debt — did not. Hanoi is also purchasing more American military equipment, deepening the countries' ties. Construction in Haiphong. Linh Pham for The New York Times Those developments show how commerce and security often collide and compete. Vietnam exports more to the United States than its new leaders want. At the same time, it helps counter an increasingly assertive China. Which of those two issues would you choose to prioritize? The law of surprise Trump and the Chinese leader, Xi Jinping, each seek to dominate the other through trade policy. But Vietnam shows it will not always go according to plan. Economic nationalism does not reliably hurt a rival or help an ally. Trade wars scatter impacts across the globe in ways that leaders struggle to predict and manage. Especially in Asia, where free trade created supply chains that crisscross many countries, the era of Xi and Trump has made prosperity feel precarious. Northern Vietnam's boom this year could be next year's bust if Washington changes course. Meanwhile, Xi has subsidized exports — threatening local industry in several countries as they fill up with cheap Chinese goods. "Power is shifting," said Bruno Jaspaert, an executive in Haiphong with business experience in Europe, the United States, Asia and the Middle East. "Over time, the most important factors — to survive — are resilience and flexibility." THE LATEST NEWS Trump's Press Conference Donald Trump at Mar-a-Lago. Maddie McGarvey for The New York Times Trump, speaking from Mar-a-Lago, criticized vaccine mandates for schools and said his administration would look into the debunked theory that vaccines cause autism. He suggested that Republican senators who oppose his cabinet nominees for what he called unreasonable, political or stupid reasons should face primary challenges. Trump said he would consider pardoning Eric Adams, the Democratic mayor of New York City who was indicted on corruption charges. Trump threatened more lawsuits against media companies. He suggested that he would sue The Des Moines Register for publishing an election poll that turned out to be wrong. Trump acknowledged the former critics and business leaders who have praised him since the election. "The first term, everybody was fighting me," he said. "In this term, everybody wants to be my friend." Read a fact-check of the press conference, Trump's first since the election. More on the Trump Administration A judge preserved Trump's Manhattan criminal convictions, rejecting an argument that the Supreme Court's ruling on presidential immunity should nullify the case. Pete Hegseth's personal security guard, a former Special Forces soldier, was court-martialed for beating a civilian hired to act in a military training exercise. Trump met with TikTok executives at Mar-a-Lago. On the same day, the company asked the Supreme Court to temporarily block a law that would require the platform to be sold to a non-Chinese owner or be banned in the U.S. Wall Street investors and executives are focusing on what they like about Trump's agenda while dismissing what they don't as posturing. More on Politics Americans' faith in the country's legal system has fallen since 2020, declining at a level seen more commonly in turmoil-hit nations like Venezuela and Syria. A New York City board denied Mayor Adams public funds for his re-election campaign because of the corruption charges against him. The decision could cost him as much as $4.3 million. Some Republicans are calling for a constitutional convention — the first since 1787 — that could affect laws on abortion and citizenship. Syria In Damascus, Syria. Nicole Tung for The New York Times The rebel leader in Syria has urged the U.S. and other nations to remove sanctions and his group's terrorist designation so that his country can rebuild. The fall of the Assad government has upended the Middle East's largest drug empire, The Wall Street Journal reports. More International News A Russian general was killed by a bomb on a street in Moscow. A Ukrainian official said Kyiv was responsible. North Korean soldiers appear to have died fighting for Russia in the war against Ukraine, according to a U.S. official. German lawmakers voted to dissolve the government after the center-left coalition fractured. A 7.3-magnitude earthquake hit the Pacific island nation of Vanuatu. Other Big Stories Jens Mortensen for The New York Times Drugmakers, including Purdue Pharma, paid pharmacy benefit managers not to restrict opioid prescriptions, a Times investigation found. A 15-year-old girl fatally shot a classmate and a teacher at a small Christian school in Madison, Wis. Six others were injured. The shooter also died. Most of the reported drone sightings across New Jersey have been airplanes that people misidentified, the Biden administration said. Others were commercial and hobbyist drones. Black student enrollment at Harvard Law School dropped after the Supreme Court's decision to ban affirmative action in college admissions. Opinions The New York Times Times Opinion gained rare access to film how America stays prepared for nuclear war. See a test of a procedure that should never be set in motion. Germany, which for years was politically stable, has broken down. It could be a sign of trouble ahead for other Western governments, Anna Sauerbrey argues. Here's a column by Michelle Goldberg on business leaders' capitulation to Trump. Ends soon: Our best rate on unlimited access for Morning readers. Save now with our best offer on unlimited news and analysis as part of the complete Times experience: $1/week for your first year. MORNING READS From left: Timothée Chalamet, Mark Eydelshteyn and Dominic Sessa. From left: Sinna Nasseri for The New York Times; Sebastien Nogier/EPA, via Shutterstock; Simbarashe Cha/The New York Times Rise of the noodle boys: In an era of macho politics, sinewy actors embody an alternative image of white masculinity. Subway surfers: Social media has attracted a new generation of daredevils. Ask Vanessa: "Is it ever OK to go barefoot in public?" Oh, the places we went! See the cities Times travel writers and photographers covered this year. Lives Lived: E.B. Furgurson III was a reporter who, after a gunman massacred five of his newsroom colleagues, helped produce the next day's issue from his pickup truck. He died at 70. SPORTS N.F.L.: Minnesota is 12-2 after throttling Chicago, while Atlanta squeaked by Las Vegas in the nightcap. W.N.B.A.: The league announced plans for its first international game, to be held in Vancouver, B.C. Men's college soccer: Vermont won its first national title after a golden goal against Marshall. See the incredible finish. ARTS AND IDEAS Tabletop fun: offline, but in vogue. Graham Dickie/The New York Times For some young people, the antidote for social media doomscrolling is to join a running club or a pickleball group. But for those who don't like to sweat while socializing, there's a new (old) alternative: board game clubs, where tattooed 20-somethings gather to play backgammon, chess and Rummikub. More on culture Performing "The Sanasopera!"  Christine Bartolucci/Peacock In "Paris & Nicole: The Encore," a sequel to "The Simple Life," Paris Hilton and Nicole Richie create an opera. The late-night hosts joked about the drones over New Jersey. "Yep, nobody knows where they come from or why they exist," Jimmy Fallon said. "It's basically air crypto." THE MORNING RECOMMENDS … Johnny Miller for The New York Times. Food Stylist: Rebecca Jurkevich. Simmer chicken and rice with ginger and turmeric to make a comforting soup. Go retro with a radio. Organize your medication. GAMES Here is today's Spelling Bee. Yesterday's pangram was pivoted. And here are today's Mini Crossword, Wordle, Sudoku, Connections and Strands. Thanks for spending part of your morning with The Times. See you tomorrow. Sign up here to get this newsletter in your inbox. Reach our team at themorning@nytimes.com. Editor: David Leonhardt Deputy Editor: Adam B. Kushner News Editor: Tom Wright-Piersanti Associate Editor: Lauren Jackson News Staff: Desiree Ibekwe, Sean Kawasaki-Culligan, Brent Lewis, German Lopez, Ian Prasad Philbrick, Ashley Wu News Assistant: Lyna Bentahar Saturday Writer: Melissa Kirsch Need help? Review our newsletter help page or contact us for assistance. You received this email because you signed up for the Morning newsletter from The New York Times, or as part of your New York Times account. To stop receiving The Morning, unsubscribe. To opt out of other promotional emails from The Times, including those regarding The Athletic, manage your email settings. To opt out of updates and offers sent from The Athletic, submit a request. 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