Trump’s tariff turbulence is reshaping Vietnam’s trade future

US President Donald Trump’s 46 per cent so-called ‘reciprocal’ tariff on Vietnamese exports, initially intended to be effective from 9 April 2025, has been paused for 90 days. While the pause alleviates immediate pressure, this period highlights the structural vulnerabilities of Vietnam’s export-driven growth model in an era of resurgent protectionism.

The development signals a tactical shift in Trump’s approach, blending brinkmanship with negotiation and leaving Vietnam balancing short-term relief against enduring risks to its role in global supply chains.

Vietnam’s acute exposure to US tariffs stems from its significant reliance on exports. In 2023, exports constituted 87.2 per cent of Vietnam’s GDP, which is high even when compared to other trade-dependent economies. The United States imported US$136.6 billion of Vietnamese goods in 2024, nearly a third of Vietnam’s total exports. Key sectors like electronics reached a US$123.5 billion trade surplus with the United States in 2024 — an 18.1 per cent annual increase that has drawn sustained criticism from Trump who sees such imbalances as emblematic of ‘unfair’ trade practices.

Trump’s tariffs also reflects broader concerns in Washington over China’s economic influence. US officials have alleged that Vietnam serves as a transshipment point for Chinese goods seeking to circumvent US tariffs and accused Vietnamese facilities of repackaging Chinese products. This perception casts a shadow over Vietnam’s manufacturing sector, which has benefitted from multinational diversification away from China. Though Hanoi denies systemic complicity in transshipment, the lack of transparency in some supply chains has provided fodder for US trade hawks.

In response, Vietnam has adopted a dual strategy of economic concessions and calibrated diplomacy. During Minister of Industry and Trade Nguyen Hong Dien’s March 2025 visit to Washington, Vietnam struck a US$4.15 billion energy deal with US firms. This included agreements to import liquefied natural gas and offshore wind technology, aiming to position Vietnam as a reliable energy partner. General Secretary To Lam’s swift congratulatory call with Trump after his election victory in April 2025 emphasises Hanoi’s urgency in maintaining open diplomatic channels.

Despite rejecting US allegations of systemic transshipment, Hanoi offered to remove tariffs on US agricultural machinery, medical devices and Boeing aircraft — surpassing concessions made by South Korea and Mexico. This reflects Vietnam’s pragmatic calculus to prioritise the short-term stability of its exports and safeguard its 8 per cent GDP growth target, even as critics warn that such concessions may undermine nascent domestic industries.

Vietnam’s push to diversify its export markets is constrained by delicate geopolitical balancing between the United States and China. Hanoi has sought to reduce its reliance on the United States by fully deploying free trade agreements with the European Union in 2020 and the United Kingdom in 2021, as well as signing up to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership in 2018.

But Vietnam remains firmly tethered to China, its largest trading partner. While these agreements allow Vietnam to hedge in the long term, their ability to compensate for immediate losses stemming from US tensions is far from guaranteed.

The 46 per cent tariff threatens to derail Vietnam’s 2025 8 per cent GDP growth target, with labour-intensive sectors like textiles and footwear at greatest risk. Vietnam’s National Statistics Office estimates that a 10 per cent decline in US-bound exports could reduce Vietnam’s GDP growth by 0.8 percentage points — a significant blow to post-pandemic recovery efforts. Multinational corporations, which have driven Vietnam’s industrial expansion, may reconsider investment plans amid rising costs and regulatory uncertainty. This could stall Vietnam’s ambition to position itself as a sustainable alternative to China in global supply chains.

With US exports to Vietnam totalling just US$13.1 billion in 2024, Hanoi lacks the leverage to impose meaningful countermeasures. This asymmetry forces Hanoi to rely on diplomatic persuasion — such as pledges to purchase more US energy exports or tighten rules of origin to curb transshipment. But Trump’s transactional approach to trade policy diminishes the likelihood of lasting concessions. The Trump administration’s stated goal of generating US$600 billion annually from tariffs to offset domestic tax cuts suggests that any relief will be temporary and conditional.

Regionally, the tariffs risk fragmenting ASEAN’s production networks, potentially redirecting investment to countries such as India or Mexico. Geopolitically, the measure risks pushing Vietnam closer to China, undermining Washington’s Indo-Pacific strategy.

The 90-day tariff pause represents a tactical ceasefire, not a resolution. For Vietnam, it offers an opportunity to solidify trust with US trade partners and advance structural reforms. Key measures include deregulating licensing systems, redirecting credit to small and medium-sized enterprises via banking reforms and enacting tax exemptions for household enterprises. Hanoi’s administrative modernisation efforts — cutting 100,000 bureaucratic roles, merging provinces and dissolving redundant ministries — are also targeting patronage networks and inefficiencies.

While strategic concessions like Vietnam’s deals with SpaceX and Boeing temper tariff risks, challenges loom as rising wages undercut Vietnam’s competitiveness, US–China tensions strain supply chain dependencies and environmental degradation threatens sustainability. Vietnam must balance institutional overhauls with political stability and demographic shifts to transform this respite into lasting resilience.

By offering unprecedented tariff concessions, Hanoi has positioned itself as a pragmatic negotiator in Trump’s transactional world. But the long-term costs of one-sided openness remain unclear. As global supply chains reconfigure, Hanoi must adapt swiftly, diversify relentlessly and prepare for a world where trade policy is both a shield and a weapon. The coming months will test whether Hanoi can turn temporary relief into lasting strategic advantage.

By Do Khuong Manh Linh – EastAsiaForum.org – June 23, 2025