Returning to the White House in January 2025, US President Donald Trump quickly implemented a series of tough tariff policies, causing market turmoil. With a highly open and export-dependent economy, Vietnam is no exception to this impact.
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| Many people are concerned that US tax policies could have far-reaching impacts on Vietnam's economy, such as exports, supply chains, and FDI attraction. Illustrative photo. (Source: Shutterstock) |
However, Vietnam has reasons to be “cautiously optimistic”. Especially in the context of the Government setting a GDP growth target of 8% or more in 2025, this “cautiously optimistic” is necessary.
“America First” Policy
Just weeks into his presidency, President Trump has made his mark on the U.S. and global economies. His plans to impose tariffs on Canadian, Mexican and Chinese goods, as well as his recent tariffs on steel and aluminum imports, have roiled financial markets and businesses.
Specifically, regarding tariffs, Mr. Trump signed executive orders imposing a 25% tax on all products exported to the US market from Canada and Mexico, and an additional 10% import tax on goods from China. The White House boss also directed the initiation of an investigation into the trade deficit, unfair currency practices, counterfeit goods, and special regulations that allow low-value items to enter the US without being taxed.
In addition, Washington will impose “reciprocal” tariffs, meaning tariffs on other countries’ goods equivalent to those currently imposed on American goods. Mr. Trump also signed an executive order imposing a 25% tariff on aluminum and steel imported into the world’s largest economy, with no “exceptions or exemptions.”
Many people are concerned that US tax policies, especially proposals to increase import taxes, could have far-reaching impacts on Vietnam's economy, such as exports, supply chains, FDI attraction, and more importantly, the growth target for 2025 and the following years.
Opportunities and challenges
Analyzing the impact of tax policies launched by President Trump, experts all agree that opportunities and challenges are still intertwined, with the opportunity factor even being somewhat dominant.
The first is the US imposing tariffs on other countries. According to Dr. Irfan Ulhaq, lecturer in Supply Chain Management and Logistics at RMIT University Vietnam, the US increasing tariffs on goods from other countries creates significant opportunities for Vietnamese businesses to increase exports to this market. US businesses are and will be looking for alternative suppliers, especially in the fields of electronics, textiles, footwear and furniture, making Vietnam a reasonable choice.
In addition, free trade agreements (FTAs) and competitive production cost advantages help Vietnam maintain long-term contracts with US importers. However, to make the most of this opportunity, businesses need to strictly comply with US trade regulations, ensure transparency in product origin and meet quality standards, Dr. Irfan Ulhaq warned.
Second, regarding the policy of imposing a fixed tax of 25% on imported steel and aluminum, Mr. Do Ngoc Hung, Counselor and Head of the Vietnam Trade Office in the US, said that these two Vietnamese products have been subject to a tax rate of 10% and 25% under Section 232 since 2018. Therefore, the impact of the new policy will not be too great.
While the US imposes tariffs on all imported aluminum and steel, Vietnam will have more opportunities to compete with countries that have increased tariffs. However, this expert believes that the profit margin of Vietnamese export enterprises may decrease.
Third, the US is Vietnam's largest export market, accounting for nearly 30% of total exports and with a trade surplus of up to 104.6 billion USD in 2024 (up 25.6% compared to 2023). Some people think that Vietnam could become a potential target in the Trump administration's tax policy. However, according to the Ministry of Industry and Trade, the economic and trade relations between the two countries are currently complementary and not directly competitive because more than half of Vietnam's export value to the US are high-tech products such as consumer electronics, smartphones, along with garments and footwear. Other products, such as furniture and agricultural products, also account for a significant part of the export structure. This opens up more opportunities for dialogue and exchange to resolve existing problems in bilateral trade.
Furthermore, the Vietnam-US relationship has also been strengthened with the upgrade to Comprehensive Strategic Partnership (September 2023). Vietnam is currently a major production base for US companies such as Apple, Google, Nike and Intel, playing an important role in the global supply chain and many products of US businesses in Vietnam are exported domestically.
Fourth, in February, President Trump signed a memorandum of understanding on a plan to impose reciprocal tariffs on all countries that trade with the US in order to “balance tariffs”. However, according to new research by VnDirect Securities Corporation, Vietnam still maintains a relatively safe trade position. Specifically, according to the weighted average effective import tax gap (AHS) of the countries with the largest trade deficit with the US in 2022, the AHS tax rate that Vietnam applies to imports from the US is 2.85%, while the US applies a tax of 4.63% on Vietnamese goods.
As such, Vietnam does not impose higher import tariffs than the US, unlike South Korea, China and Mexico – countries with large tariff differences between the two trade directions. This helps Vietnam reduce the risk of being subject to higher reciprocal tariffs than the above countries.
Proactively resolve difficulties
However, the US's application of a series of new tariff policies will make it difficult for countries to export to the world's largest economy, leading to disruptions in the supply chain. This may prompt countries to seek alternative markets, including Vietnam. On the other hand, if the tax rate is higher, the price of Vietnamese goods exported to the US will increase, reducing competitiveness and the ability to maintain market share. As a result, export turnover will decline, leading to the risk of a trade deficit or surplus.
Speaking to The Gioi and Viet Nam Newspaper, Dr. Ha Thi Cam Van, Senior Lecturer of Economics at RMIT University Vietnam, said that with the US being Vietnam's largest export market, key export industries such as electronics, textiles and footwear will be under great pressure from the tax increase policy.
Faced with the pressure of a possible global trade war, under the direction of the Government and the Prime Minister, the Ministry of Industry and Trade has developed scenarios and response plans. The key solution identified is still to diversify export markets, industries and products. Vietnam can take advantage of the 17 signed FTAs and nearly 70 bilateral cooperation mechanisms to expand its market, not only focusing on traditional partners but also exploiting niche markets. At the same time, it is necessary to proactively narrow the trade gap with the US by increasing imports from this country, pursuing FTAs that benefit the US, thereby strengthening its position as a reliable trade partner and reducing the risk of high tariffs.
Responding to The World and Vietnam Newspaper, Dr. Nguyen Son, lecturer in Supply Chain Management and Logistics at RMIT University, said that Vietnam needs to pursue a balanced, independent and multi-dimensional strategy to take advantage of opportunities from the trade war while still managing risks.
He proposed five focuses, including: Strengthening legal supervision to prevent trade violations; carefully screening FDI to ensure attracting quality investment, providing opportunities for technology transfer and high-skilled jobs, instead of accepting backward or polluting enterprises; accelerating infrastructure development, especially in the transport and logistics sector; enhancing workforce development to meet the demand for higher-value manufacturing, prioritizing the development of human resources with higher productivity and innovation capacity in the context of flourishing AI technology, especially in emerging fields such as semiconductors; and continuing to diversify trade relations through FTAs, while maintaining a balanced relationship with both the US and China.
With proactive, coordinated solutions, Vietnam can better position itself to take advantage of opportunities from supply chain shifts while building a more resilient, sustainable economy, improving its position in the value chain, and aiming to achieve growth targets this year and beyond.
Source: https://baoquocte.vn/kinh-te-viet-nam-truoc-lan-song-thue-quan-lac-quan-than-trong-306722.html
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