Can Vietnam Dodge the US tariff bullet ?
Vietnam has done almost everything necessary to preclude the possibility of the US slapping tariffs on its exports. The question is whether this would be enough.
ietnam, as one of the countries with the highest trade surplus with the US, has done a lot to placate the Americans on the issue. Hanoi’s actions, such as promises to buy more US goods and invest in the country, appear to have satisfied senior US officials. The question is whether they would be able to placate US President Donald Trump.
At a 14 March meeting between Vietnam’s Industry and Trade Minister Nguyen Hong Dien and US Trade Representative Jamieson L. Greer, the latter expressed his appreciation for what he deemed to be Vietnam’s proactive coordination and straightforward goodwill approach to addressing current US concerns.
The two sides saw the signing of a series of cooperation agreements and contracts for the purchase of machinery, equipment, raw materials, services, and goods between Vietnamese and US enterprises. The total value of the signed contracts was US$4.15 billion.
According to a Viet Nam News report, Vietnam has also allocated US$50.2 billion for aircraft procurement, aviation services, oil and gas exploration and refined petroleum imports. Another agreement for US$36 billion is under negotiation and is expected to be finalised soon. In total, the value of economic and trade agreements signed between Vietnamese and US enterprises stands at US$90.3 billion. Given that Vietnam’s GDP stood at US$476 billion last year, this is a strong commitment to resolving the trade balance issue with the US.
Vietnam has pulled out all the stops to placate the US. Given the importance of the trip, Mr Dien carries the additional title of “Special Envoy of the Prime Minister”, which means that he conveys the Vietnamese government’s message to the US government that Vietnam stands ready to discuss all economic issues with the US, especially the US-Vietnam trade balance. Soon after the US presidential elections, To Lam, the General Secretary of the Communist Party of Vietnam, called to congratulate President-elect Donald Trump. This is a demonstration of Hanoi’s willingness to strengthen political communications and thus reduce the possibility of the US slapping tariffs on Vietnam.
Whether this will assuage the Trump administration is still an open question. This will depend in part on the speed at which the US$90.3 billion is spent. For now, this appears to be unclear. The government’s e-newspaper said that it is for the period starting this year, but Nguyen Quoc Dung, the Vietnamese Ambassador to the US, clarified that the period in question will span from 2025 to 2030. He added that the US currently has no additional requirements for Vietnam and will continue discussions with Hanoi in advance of the US’s decisions. This is probably the highest commitment that the US Trade Representative could make in such an unpredictable period.
The visit by Minister Dien to the US is important for Vietnam in light of the increase of tariffs which could be levied on Vietnamese exports to the US. Vietnam has the fourth-highest trade surplus with America. Last year, the US trade deficit with Vietnam was US$123.5 billion, an 18.1 per cent increase over 2023. China, which is at the receiving end of US tariffs on Chinese exports, has increasingly used other countries, including Vietnam, to send exports to the US.
Moreover, Vietnam has a high export-to-GDP ratio. According to a Reuters analysis, Vietnam has the highest export-to-GDP ratio among Asian countries (the other two are Taiwan and Thailand). In his first term, President Trump blamed Vietnam as “almost the single worst abuser of everybody, worse than China.”
The US market constitutes nearly a third of Vietnam’s exports. Therefore, an increase in tariffs against Vietnamese products will severely affect the country’s economy. In Vietnam, foreign companies make up 75 per cent of Vietnam’s exports. They will also become victims of the tariff increase. In the worst-case scenario, they will have to relocate some of their factories away from Vietnam, which will affect the country’s economic health.
From the geopolitical point of view, the US needs a stronger Vietnam in its competition with China. A Vietnam whose economy is weakened by US tariffs will not be beneficial for long-term US interests.
Besides trade, Vietnam also understands that President Trump is interested in attracting foreign investments into the US. With its limited capacity, Vietnam appears to be trying its best to meet this demand. According to a government newspaper, more than 100 Vietnamese enterprises have registered to attend the Select USA 2025 event to learn about investment and business opportunities in the US. Vietnam’s total committed investment to the US stands at US$1.26 billion.
At the meeting with Minister Dien, Trade Representative Greer also called on Vietnam “to implement stronger measures to open its market and improve the trade balance in the coming time.” The two sides also agreed to review and remove trade barriers that hinder investment and business activities. They also agreed to work together to control trade fraud, origin fraud, and illegal transshipments. This is the area where Vietnam could do the most. It is expected that the Vietnamese government will take strong measures in this direction to meet the American demands.
From the geopolitical point of view, the US needs a stronger Vietnam in its competition with China. A Vietnam economy weakened by US tariffs will not be beneficial for long-term US interests. Although the US trade deficit with Vietnam is high in absolute figures, bilateral trade with Vietnam is not significant compared to US trade with the rest of the world. It accounts for 3 per cent of US total trade. Thus, Vietnam is hoping that the Trump administration will take a softer position towards it.
It seems that Vietnam has done everything it can to show Vietnam’s goodwill in resolving the trade issue with the US. Greer said that Vietnam is “understanding and directly addressing current US concerns”. This shows that at the ministerial level, the US appreciates Vietnam’s efforts. Whether President Trump will think likewise, however, is the key question.
By Nguyen Hong Thach – ISEAS – Yusof Ishak Institute / Fulcrum.sg – March 25, 2025