Effects of American Economic Decline

Readers Question: What are the effects of the economic decline in America to the country Vietnam?

If the US economy entered into a recession the main effects on other countries would be:

1. Decline in exports. American consumers are a key component of world trade. If there was a decline in exports to America it would lead to lower growth in countries like Vietnam. In certain sectors it could cause a rise in unemployment. There could also be a negative multiplier effect ‘knock on effect’/ The initial fall in exports could cause a bigger fall in Aggregate Demand.

However, it depends on what % of exports are to America. For Vietnam, exports to the US are important, but not a huge %.This page shows that Vietnam exports to us totalled $7.6bn in 2005. link US – Vietnam trade

This is not a huge amount, it is about 20% of exports.

It depends on how the rest of the economy is affected. For example if domestic demand remains strong then this might offset any fall in exports

It depends on whether Vietnam is able to increase its exports to other Asian economies. For example, it may be that China’s economic growth takes the place of US exports. China is nearer.

2. Effect on Exchange Rate.

The economic decline of America has led to a long term devaluation of the dollar. If the US enters recession, interest rates will fall and there will be a bigger fall in the dollar. This may cause a rise in the Vietnam currency making its exports to US less competitive.

3. Has the US economic decline been overstated?

The other thing I should say, that it is perhaps premature to talk of America’s economic decline. True the dollar has been devaluing and they may enter recession. But, they are still one of the most powerful economies. When people talk of America’s economic decline they really mean ‘relative economic decline’. In other words the US takes a smaller share of world trade, but the economy is not actually contracting

See also: what went wrong with the US economy 

Main Exports from Vietnam

  • garments
  • footwear
  • seafood
  • coffee beans
  • crude oil
  • rice

Will Vietnam roar again at BBC

One Response to Effects of American Economic Decline

  1. sheeree January 28, 2008 at 10:18 am #

    what will happened to the business sector of vietnam if their is an economic decline in america?