In common with most stock market indexes, the FTSE 250 was hurt by ‘Liberation Day’. In the three days after President Trump’s related speech, it fell over 4.5%. Unfortunately, we now know that the maths used to calculate the tariffs that were apparently being imposed on the United States was flawed.
Crunching the numbers
Take Vietnam as an example. America’s claiming that the average tariff charged by the South-East Asian country — including “currency manipulation and trade barriers” — is 90%. In fact, little science went into this calculation.
As the table below shows, it simply reflects the large trade surplus that Vietnam has with the US.
| Measure | 2024 |
|---|---|
| US imports from Vietnam ($bn) | 136.6 |
| US exports to Vietnam ($bn) | 13.1 |
| Trade deficit ($bn) | 123.5 |
| Deficit as a % of imports | 90.4 |
Indeed, the Office of the United States Trade Representative admits: “The majority of US exports to Vietnam face tariffs of 15 percent or less”.
Leaving aside the rights and wrongs of what’s going on at the moment, this got me thinking about whether there’s an opportunity here. Unsurprisingly, stocks with an exposure to Vietnam have been badly hit. Could now be a good time for growth investors to take advantage of falling valuations?
Let’s take a look.
Something to consider
Vietnam Enterprise Investments (LSE:VEIL) is a FTSE 250 investment trust that takes positions in listed and pre-IPO companies with “attractive growth and value metrics”. Its latest (at close of business 24 April) net asset value (NAV) per share is 656p. This represents a significant 20.7% discount to its share price.
Some of this probably reflects the fact that it’s difficult to value unquoted companies. But I also think it’s a sign of concerns that the country might be badly affected by a trade war. Towards the end of 2022, there was no discount.
The trust has a good track record. Over the past 10 years, it’s delivered an annualised 8.3% increase in its NAV. And since April 2020, its share price has risen over 30%. But over the past three weeks, it’s down 12%.
Interestingly, for a country that has a reputation for manufacturing cheap goods, the trust’s biggest exposure is to the financial services sector.
The World Bank’s latest forecast is predicting Vietnam’s Gross Domestic Product to grow by 6.8% in 2025, and 6.5% in 2026. But these estimates were prepared before Liberation Day and therefore need to be treated with some caution. Dragon Capital, the fund’s manager, described the tariffs as “painful” and estimates a negative 1.4%-2% hit to growth.
However, it said: “The relative impact – when viewed against Vietnam’s proactive diplomacy, ongoing structural reforms, and regional cost advantages – is likely manageable”.
Final thoughts
Personally, I don’t think any country will win in a trade war, including the US. For this reason, I suspect President Trump will reduce the ‘reciprocal’ 46% tariff on Vietnam once he’s able to claim some concessions. If I’m right, the events of the past few weeks could become a distant memory.
With its open economy, stable government and young workforce, Vietnam pitches itself as an alternative to China. The country’s worked hard to create a pro-growth business environment, which should help its biggest and best companies prosper.
For these reasons, investors could consider taking a position in Vietnam Enterprise Investments.
