Sir, I am a master in macro-economics so I will take a dig.
GDP is calculated as = C + G + I + NE
= total private
Consumption + total
Government expenditure +
Investments +
Net
Exports (exports-imports)
Total trade is not counted, only the net of exports-imports; thats why the trade/gdp ratio of some countries is above 100%
In case of Vietnam,
Annual PPP GDP per year is $ 1 trillion
Annual Nominal GDP is $260 billion (vietnam, like india has an artificially weakened currency, this is how the west likes it)
Vietnam's yearly Exports are $290 billion - Imports are $260 billion
Net Exports are $30 billion
Vietnams GDP is = $90 billion (private consumption) + $70 billion (Government Expenditure) + $70 billion (Investments) + $30 billion (Net Exports) =$260 billion Nominal GDP
For Trade Ratio: 290 exports + 260 imports = 550
Total trade (550) / Nominal GDP (260) = 212%
This basically means, Vietnam is a very trade dependent country and has very little internal economy and thus is not very economically sovereign. Its basically a sweatshop economy, "mini china of 80s" where Korea, Japan, and China send low value goods to do some labor intensive work and add some value and export them back to Korea, Japan, China and USA. This is their entire economic model. In a sense, korea, Japan and China control majority of economic activity in vietnam so its own govt doesnt have much room to go against these countries.
In contrast, India has very low trade as percentage of its GDP, most of our economy is internally fueled, we have a large and productive domestic market so we dont "need" to depend on outsiders. Even if India closed itself to the world like USSR and rest of the world stopped trading with India, our economy will only take a minor 20% hit while Vietnam would crash 60-70%
Same figures for India year 2019
GDP Nominal $3 trillion = $1.5 trillion private Consumption + $1 trillion Investments + $.7 trillion Government Expenditure + ( - $.2 trillion Net Exports)
Exports = $320 billion
Imports = $520 billion so Net Exports are - $200 Billion
Trade ratio for India = 840/3000 = 28%
While for Vietnam its over 200%
Trade ratio isnt a very useful figure by itself without knowing what stage of economic development a country currently is in. It only tells you how globally connected and trade dependent a country is. Large, independent countries like USA and India, China have a low trade ratio.
en.wikipedia.org
As you can see, port city-states, small tourist destinations, one trick pony oil sellers and and sweatshop countries have high trade to gdp ratio. (Ignore Eu countries bc most of that trade is intra-Eu)
In a developing country context, moving to a higher trade ratio from a low base is considered a sign of progress and globalization so is looked upon favorably. It is good for developing countries to an extent. Especially in case of India. Even though I said earlier India doesnt "need" to depend on foreign trade, it
should work to increase its exports rapidly. Because for a group of countries such as India, whose currency has been artificially weakened against USD, it makes sense to sell more goods to USA and earn american prices rather than selling it at home and earning rupee prices.
Rupee's real value in an ideal PPP world roughly = Rs. 25/ US dollar. This is what the value "deserves" to be today if there were no artificial interference in the world.
However, in the current global world order, value = Rs. 75/US Dollar
This is where the difference in Indias PPP GDP ($11 trillion) and Nominal GDP (3.2 trillion) comes from.
Rupee is artificially down by 2/3rds or in other words US Dollar is overvalued 3 times compared to Indian rupee. It is not possible to overnight change these values without worldwide chaos and geopolitical friction.
So, next best thing is sell maximum amount of goods n services overseas and earn real higher value for these goods n services and avoid artificially lower rupee payments by selling domestically. You could sell a vada paav for Rs. 10 ($.13 USD) in India or you could export a packet of frozen Indian Burger to USA for $2 and make 1400% more. I buy $5 packets of frozen indian food here all the time.
As this process continues and eventually as more and more indian goods n services reach american shores, indian and american prices will converge and USD and Indian rupee will slowly reach a new equilibrium of trade flows where INR reaches towards its true value of Rs.25/USD over the years, everything else being equal. This meanwhile create lots of additional jobs and industries in India and will make GDP grow faster.
For all countries of the world with lowered currency values against USD, it makes sense to export until value reaches its true value. For countries with overvalued currencies, such as USD itself, it makes sense to import more and more from poor developing countries such as India because they are getting things partially free - at a lower than real rates. So you have been seeing USA having big trade deficit year after year and it is fine with it. Because it is advantageous to it. There is another aspect to trade, which is financial funds flow, basically change in investment position with respect to other countries but for sake of simplicity we will ignore it for now.
Coming back to trade ratios and its importance, I have noticed countries go thru 3 different phase while becoming from a poor, developing country to rich, powerful developed country.
Phase 1. Country is poor and just getting its economic development started. In this phase you are starting from a low trade ratio/GDP and any increase in trade % is good for the economy and country. This was USA till 1940s. USA was the biggest trading partner of the world and responsible for 50% of all of worlds GDP in world war 2. They reached there using the export based model and trading extensively with overvalued currency holding Europe during its phase of development.
China from 1980-2007. China had a huge economic expansion using this export led model and trade went from almost nil in 1980 to 60% of GDP in 2007 at its peak.
This is the phase India is in now. India is at roughly 30% now.
Phase 2
During this phase, countries have already developed sufficiently to go from low income to middle income and have achieved the required domestic industrialization and scientific know-how to reduce dependence on foreign trade. At this stage, countries try to increase size of domestic market and private consumption part of the GDP. As a result of this "rebalancing" Trade Ratio to GDP goes down. By this time your country's currency is close to reaching its true value against formerly overvalued currencies so there is no more incentive to export more n more. A benefit of reaching this phase is that your country has more strategic autonomy now because you no longer has to depend on goodness of other countries to allow your exports for survival. At this stage, big countries with superpower aspirations start working on critical core technologies and industries to achieve complete independence and start securing important resources. Perfect example is China. Before Global Financial Crisis in 2007, Chinas trade ratio-GDP was 60 % Today in 2020 it is much lower, at 30%
So, China went thu a period where it tried to increase trade ratio for 3 decades and then spent next decade 2007-2020 bringing it back down by increasing its private consumption parts of GDP. This was the right thing to do. As export led model had served its purpose and now its time to move on higher up the ladder. As predicted, China has recently started investing in core and future technologies such as quantums, AI, hypersonics, semiconductor fabrication to make itself completely independent and started BRI and debt traps to secure resources. So, China is currently at the end part of phase 2. India will reach this stage if we keep successfully implementing phase 1 during the next 15 years. That is another reason why I think INR will stay weak against the dollar for a few years, to encourage exports and industrialization and GoI wont be in a hurry to revalue rupee higher anytime soon barring unforeseen circumstances.
Phase 3
In this stage, the country has secured all of its critical needs and has access to all needed resources to become self-sufficient if needed,. Now is the time to reverse the tables vis-a-vis currency values. Now you are strong enough to rearrange the world order and impose your currency values and global financial architecture. In this phase you go from net exporting to massively net importing as your currency is now overvalued compared to others and you can exploit the poor developing Phase 1 countries by importing more n more things from them for cheap. You get an extra bonus if you are a reserve currency like US Dollar. You get fiat privileges to print away as much money as you want for no cost and offload all the debt on others. The world will be forced to absorb all this frivolous debt if it wants to stay a part of your designed financial architecture. USA is here. China is trying to reach this stage over the next few years. Sometimes things dont work exactly in sequence and you can make a big leap if you are a large country and happen to be at the right place at the right time. USA got lucky, at the end of world war 2, it kind of jumped from phase 1 to 3 because there was no other country left standing. In 1944 as WW2 neared its end and Britain, France, Germany, USSR and Japan were destroyed and bankrupt, USA took over the role of superpower by default and US made the famous Bretton Woods Agreement in 1944 that is still the bedrock of all of financial world today.
So, its possible for some country to skip some logical progression but normally most countries follow the above model of development from phase 1 to phase 3. India can reach stage 3 in 30 years or things can speed up if things align perfectly geo-politically and we play our cards right.
Sorry, for the long post. Please advice on better editing, formatting etc for future if found wanting.