Vietnam could be said to have had a ‘good’ pandemic. Picking up on problems within China’s healthcare system through covert surveillance, it was able to respond quickly before China itself admitted to the world it had a problem with the fast-spreading virus.
This in turn meant Vietnam was well-prepared and minimised the impact of Covid in the country. It fared better than most. China’s huge lockdown program and the disruption it caused to industry also meant Vietnam started to capture some of the manufacturing deals that otherwise would have gone to China in 2021-22. Vietnam’s economy has boomed in the first half of this decade.
Donald Trump’s arrival was probably more predictable than Covid’s but his tariff policy towards Vietnam was less so.
Massive tariffs proposed for Vietnam
Trump has announced he will impose 46% tariffs on Vietnamese imports, one of his most aggressive trade moves and the third-highest rate imposed on any country. The White House has not revealed its methodology, but there have been suggestions that each country’s tariffs are assessed by simply dividing their surplus with the US by their exports to the US. The “reciprocal” tariffs appear to be calculated at half this rate.
Vietnam has a lopsided trade relationship with the US. In 2024, Vietnam had the third-largest goods trade surplus with the US after China and Mexico, growing by 18% over the previous year to $123.5 billion. Unlike other major US trading partners, Vietnam imports few US goods to help balance the ledger.
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Moreover, Vietnam has long faced accusations that its manufacturers were re-badging goods to help Chinese manufacturers skirt existing tariffs, adding little or no value locally. A recent Wall Street Journal analysis of data from CEIC found that there was still a strong correlation between Vietnam’s imports from China and its exports to the US.
On the other hand, a recent Harvard Business School working paper found that rerouting is less common than previously thought. An analysis by the Lowy Institute suggested that three-quarters of imports from China “can be explained by factors other than hidden Chinese exports to America,” and Vietnam is “playing a helpful role in the diversification of US supply chains away from China”. But perception matters, and Washington believes it’s a problem.
How is Vietnam going to cope with US tariffs?
The key question for Vietnam now is how it will minimise the impact of these new tariffs and how it might negotiate to try to lower them. Data analytics firm Exiger calculated that Vietnamese goods would face US$63 billion in tariffs. There’s no getting around it: this is likely to have a negative impact on Vietnam’s economy, at least over the short term.
“Based on tariffs of 46% we estimate the impact to Vietnam’s GDP at between 1.4-2.0%,” said Vietnam fund manager Dragon Capital in a note to investors yesterday. “[Wednesday] was an opening salvo, but the key date is 9 April when the tariffs go into effect. We expect Vietnam to be proactive with both economic transactions and non-trade negotiations to target a tariff level on par with regional peers. Our equity market outlook is for volatility in the short term, with the government’s decisive reform efforts favouring domestic consumption prevailing over the medium-to-long term.”
Vietnam exported $136.6 billion to America in 2024 and imported just $13.1 billion, leaving a large bilateral trade surplus. Total exports amounted to $405 billion, supported by strong participation from foreign direct investment (FDI), which accounts for 72% of Vietnam’s exports and employs 5.2 million workers (8.5% of the labour force).
Trade activity contributed roughly 8% of the GDP. Among Vietnam’s top exports to America are computers, electrical products, machinery, apparel, and footwear. These categories overlap directly with other major exporting countries to American such as China, Mexico, Thailand, and South Korea – making the relative tariff burden critical.
What are the medium term risks to Vietnam?
The big concern for Vietnam is that multinational firms may begin reallocating supply chains if tariff differentials persist. Dragon Capital estimates this shift could reduce Vietnam’s export value to the U.S. by an additional $15–24 billion as production migrates to lower-tariff peers. Combining both impacts, the fund manager tentatively estimates that between $28.5–37.5 billion worth of Vietnamese exports are at risk, roughly equating to 1.4–2.0% of GDP, ceteris paribus.
“This tariff shock is a stress test – not an endgame,” Dragon Capital told investors. “Vietnam is in the middle of a transition: graduating from a low-cost exporter to a strategic trading partner while navigating global protectionism. Tariffs of this magnitude are painful, especially for key sectors like electronics, machinery, apparel, and footwear. But the relative impact – when viewed against Vietnam’s proactive diplomacy, ongoing structural reforms, and regional cost advantages – is likely manageable.”
Hanoi is appealing to the President and his allies personally. The Trump organisation reportedly plans to invest billions of dollars in Vietnam’s golf courses, hotels and real estate. Similarly, the government has granted Elon Musk’s SpaceX permission to trial its Starlink satellite internet service in Vietnam.
“Vietnam is very unlikely to follow Canada or Europe in applying reciprocal tariffs,” said Craig Martin, Chairman of Dynam Capital, which manages the Vietnam Holding Investment Trust. “At present, it imports too few US goods to impose any real pain. The flip side is that it wouldn’t have to increase imports by an unreasonable amount to lower the surplus.”
As Vietnam tries to make its case, it will likely use certain geopolitical advantages. If US-China tensions grow – not unlikely given the tariffs are largely aimed at China specifically – Washington might see value in cultivating better ties with Hanoi, which has a complicated relationship with its northern neighbour.
Also, unlike Canada and Mexico, Vietnam doesn’t share a border with the US. Trump’s first tariffs were on Canada and Mexico, allegedly to pressure them on fentanyl and immigration. Neither issue is a sticking point with Hanoi.
Some of the biggest Vietnamese businesses already have a presence in the US, mainly because they want access to the world’s most lucrative market. Tech leader FPT has been in the US since 2008. Carmaker Vinfast is already selling EVs in the US and has plans to open a factory there.
This process might accelerate under Trump, but it will be difficult to fully know the impact of the tariffs, as they will rarely be the sole reason for a Vietnamese business expanding in the US. According to one report, more than 100 Vietnamese enterprises have registered to attend an event to learn about investment and business opportunities in the US. However, the current regulatory environment makes it relatively difficult for Vietnamese businesses to invest overseas, so there might be limits to this approach.
At the same time, Asia has been the engine of global economic growth for decades now, and one inevitable result is that trade within the region is more significant than ever, facilitated by a network of free trade agreements. For this reason, Vietnamese businesses might vote with their feet and focus more energy on capturing customers across APAC instead of the US.
“The tariffs will clearly have some impact on Vietnam,” said Martin at Dynam Capital. “However, this must be measured against greater fundamentals. The most recent GDP growth figures topped 7%. Foreign investment is growing. Industrial production is up. Vietnam has a young, tech-savvy and increasingly educated population, which is fuelling a growing consumer class.”
