46 per cent US tariffs to pose big challenges for Vietnam

The window for tariff negotiations with the United States is still wide open, but it is likely that exports will be strongly affected, putting pressure on the exchange rate.

Tran Hoang Son, director of Market Strategy at VPBank Securities, said, “If Trump‘s massive 46 per cent Vietnam tariffs come into effect on April 9, it will create an extensive impact on Vietnam’s economy across aspects from exports, economic growth, exchange rate, inflation, and foreign direct invesment (FDI) inflows.”

In terms of exports, the US is Vietnam’s largest export market, accounting for about 30 per cent of total export turnover ($136.6 billion in 2024) and making up 26 per cent of GDP.

The 46 per cent tariff on Vietnam could soon raise prices for Vietnamese products in the US while lowering Vietnam’s competitiveness against countries such as China, India, or Mexico.

Spearhead industries such as textiles, footwear, electronics, wood, and seafood will be heavily hit. It is estimated that exports to the US will drop sharply, by up to 20 – 30 per cent or even more, depending on the market shifts.

Regarding imports, Vietnam may increase imports from the US to reduce its trade surplus ($123.5 billion in 2024) to ease tariff pressure. However, this will raise import costs, especially for technology products and production materials.

In light of declining exports and increasing imports, Vietnam’s trade surplus with the US would significantly narrow, which results in a further reduction in a total trade surplus of $24.77 billion in 2024 and puts pressure on foreign exchange supply.

“If the State Bank of Vietnam (SBV) intervenes by selling foreign exchange reserves, the USD/VND exchange rate will increase 3 – 5 per cent in 2025. Exchange rates would depreciate simultaneously in the market hit by Trump’s tariffs. In this context, if the yuan weakens in response to the US’ tariff policy, it will further exacerbate exchange rate pressure, forcing the SBV to operate more flexibly to stabilise the foreign exchange market,” Son added.

According to Pham Luu Hung, chief economist of Saigon Securities (SSI), VND has been depreciating against USD for a long time, creating a certain « buffer. » Therefore, the pressure to adjust the exchange rate in the short term may not be too strong.

“It is vital to closely monitor the exchange rate, but the SBV still has the ability to control it in the short-term thanks to the existing policy tools,” he added.

A 46 per cent duty on imports from Vietnam is a huge shock to businesses. Son from VPBankS said, “This move may affect GDP growth in 2025. This depends on the ability to stimulate domestic consumption and public investment. Not to mention, the spillover impact of shrinking exports will lead to lower domestic consumption, higher inflation, and a potential decrease in FDI attraction and disbursement in the short term.”

“To reduce negative impact, Vietnam will negotiate with the US to reduce tariffs or adopt exemptions for strategic goods while increasing imports from the US to balance trade,” he said, encouraging companies to diversify markets by exporting to the EU, Japan, and Korea through free trade agreements like the Vietnam-EU Free Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

At the same time, there should be measures to stimulate the domestic economy, like increasing public investment disbursement, reducing lending interest rates, supporting businesses to convert production to serve the domestic market, and controlling the money supply to stabilise exchange rates and inflation.

In the same vein, Hung from SSI said, “As exports will be heavily affected going forward, growth momentum will come from domestic sources. Accordingly, the SBV’s objective of 16 per cent credit growth this year is still achievable.”

“Banks will seek opportunities to further increase lending once the domestic sector experiences significant growth. For example, infrastructure lending was classified as a risky sector because of the long payback period. Banks faced the risk of imbalance in the term structure, » Hung said.

« Nevertheless, the government is encouraging infrastructure investment by shortening public investment procedures, which in turn enables businesses to recover their investment money more quickly. Consequently, banks are also increasing infrastructure lending,” he added.

According to experts, the 46 per cent tariff from the US will be a huge shock, but the specific impact depends on Vietnam’s policy response. If proactive and flexible, Vietnam can minimise the damage and find opportunities in the challenges.

By Thuy Lien – Vietnam Investment Review – April 3, 2025