Vietnam has far bigger worries than its baby bust

Vietnam rightly worries about the harm U.S. tariffs will inflict on its success and even more bullish aspirations. The levies will slow an economy that's racked up impressive rates of growth. The past few months have also revealed a challenge of a different nature: A declining birth rate.

This is a country, often hailed as a development model, that has a lot on its plate. It should avoid going overboard on sweating demographics. That’s not an existential issue — yet. In some ways, the trend toward fewer births could even be called a victory. Trade, linked so intimately with the decades-old industrialization plan, is the more vital front. The setting of priorities is important, but they can travel on two tracks.

The government recently scrapped a long-standing rule that limited households to no more than two kids. Couples will now be allowed to welcome as many babies as they wish. At first glance, the shift looks dramatic and recalls China's panicked jettisoning of its iconic one-child policy a decade ago. All the more so because both nations have communist rulers, showed a penchant for central planning before discovering that markets can enrich and saw pint-sized families as a path to poverty elimination.

There's a healthy pragmatism to repealing the policy. In practice, Vietnamese authorities tended to turn a blind eye to people who exceeded the quota, with the important exception of party cadres (violators risked losing their jobs). And with fertility retreating, as is the case in many parts of the world, there would have been little enforcement required. Arguably, Vietnam's pivot brings the law into line with reality. The root cause of the decision, however, does point to an underlying concern.

Having pulled off what was initially intended in 1988 when the fertility rate was more than 4.0, officials now fret having gone too far: The rate declined to a record low of 1.9 per woman in 2024. That put the estimate of how many children a woman will bear below the replacement level for a third consecutive year. Numbers like this tend to get attention.

That's certainly been the case with neighbors whose commercial success Hanoi has sought to emulate. Japan, South Korea and Singapore, whose numbers are significantly lower, are rolling out steps to make motherhood more attractive. Developing countries like Malaysia, Thailand and Indonesia are witnessing the same trend with a lesser degree of consternation — and fewer resources to throw at the issue. (The Philippines actually welcomes the advent of smaller households.)

While future labor shortages, and the fiscal strains that come with a smaller workforce supporting more retirees, are worth planning for, any anxiety needs to be kept in perspective. Television dating shows and propaganda posters urging couples to get busy are fine and unlikely to cause harm. But officials should also be clear-eyed that the benefits will be modest. Singapore also tried to play matchmaker. That initiative has been wound down.

The hefty tariffs imposed by U.S. President Donald Trump are a far greater worry and show the vulnerability inherent in another part of Vietnam’s development strategy. Like China in the Deng Xiaoping era, the nation sought a way to wealth through wooing foreign manufacturers.

Factories initially focused on churning out cheap goods for American consumers. More recently, technology firms came to see Vietnam as a cornerstone of a "China Plus One” approach: shifting production to a place that's close to the supply chains still reliant on China, but not actually in China. The idea was to avoid falling foul of Washington as it sought to constrain Beijing. Then came the tariffs, set at a steep 46%.

In some ways, if the tariffs — suspended for 90 days — were to hit, this was probably the least inopportune time. The economy expanded almost 7% last quarter, a bit slower than the blistering clip of 2024. The government is sticking to its goal of double-digit growth in the coming years. This sort of ambition assumes that the trade wars are either temporary or not so severe that it forces a radical rethink.

Scope for deals? Sure. Vietnam has dispatched top negotiators to the U.S., pledged to dismantle barriers and even put a Trump-branded golf resort on the fast track. Can Hanoi’s model, conceived when Washington was attached to free trade, survive in a less benign era? In the event Trump's efforts to upend the economic order succeed, Vietnam will need to do more than just navigate between the two giants. It will have to interest investors on its own terms, not as the China alternative or a China-lite.

This is a more existential question than shoring up the birthrate. Plan for a future of smaller families by all means, but don't wring your hands over fertility. Take the win. Panic won't get you very far with tariffs, either, even if anxiety certainly seems warranted.