Fake Growth, Real Debt: The Dangerous Game of Trading with Low-GDP Nations

Any entity you trade with needs a credit check. Why? Because it will allow you to gauge if this is a reliable partner or if they are a risk.

You must have this when making trade deals. In addition to understanding the economic structure of each country.

Delays (receivables) do nothing for an annual trade deficit.

Example: VietJet revised its delivery schedule to align with its recovery and growth plans post-pandemic. The airline sought flexibility in deliveries and commercial incentives, indicating that it also played a role in rescheduling the timeline to suit its operational needs.

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GDP

Let’s say you are trading with a country thats has a GDP of $500 billion. (in a closed capital account like China, Vietnam, Cambodia, or Laos - meaning this GDP figure is priced in the domestic currency that is not liquid internationally and determined by what they value it as!)

GDP Per Capita

GDP per capita is $3,500 (nothing) - a reference for consumer demand.

Forex Reserves

With total Forex Reserves of $80 billion within the central bank of that country or 12 months’ worth of global trade with the entire world.

The Deficit

How do you close a trade deficit of -$80 bln PA with the United States?

You cannot.

Because all the country has for its international liquidity is its forex reserves of 80 bln, which is worth several months of global trade.

Additionally, a reduction of the trade deficit cannot turn into economic productivity because there is nothing to purchase from the United States that can add to GDP.

Vietnam imports less than $10 bln of crude oil PA.

That’s all they need.

This is why 0% tariffs are potentially worse than 46%. Because the 46% on the $ 14 billion is potentially fixed. But expect Vietnam to circumvent and trade with others more in a 0% or 46% environment.

There is only one objective: to sustain as much of the deficit with the US in absolute terms as possible.

This is why all their leaders are so rich and send all their kids to the elite schools around the world.