U.S. Customs Policy Impact and Aftermath for Vietnam's Global Trade
In the pursuit of its ambitious goal to become a high-income country by 2045, Vietnam is seeking alternative growth engines to supplement its shrinking export market. The country's strategy to achieve this diversification and balance may involve a key partnership with the BRICS (Brazil, Russia, India, China, South Africa) grouping.
The U.S.'s new trade policy, however, is causing a ripple effect. According to recent reports, 44% of businesses in Vietnam are restructuring, with many relocating their procurement to other countries due to the policy. Moody's Analytics and the International Monetary Fund have revised their 2025 growth forecasts downward to around 5% as a result.
The Trump administration's tariff strategy, aimed at halting or rolling back China's economic rise, has led to a new form of globalization where national security and geopolitical rivalry take precedence over economic efficiency. This strategy has had a significant impact on Vietnam, a country deeply integrated into global supply chains. Vietnam's exports to the U.S. surged from $40 billion in 2018 to $136.5 billion in 2024, accounting for nearly 30% of its GDP.
However, the tariffs imposed by the Trump administration, such as a 20% tariff on all Vietnamese imports and a 40% tariff on transshipment goods from China, threaten Vietnam's growth target of 8% by 2025 and put pressure on its export-dependent economy, particularly the textile and machinery sectors.
Vietnam cannot afford to jeopardize its relations with other trading partners and adheres to the principle of 'opening the market without compromising sovereignty.' Prime Minister Pham Minh Chinh stated that negotiations with the U.S. must be seen in the context of Vietnam's overall foreign trade policy, which includes 17 free trade agreements and partnerships with 60 markets worldwide.
Despite these challenges, there are signs of hope. Companies like NVIDIA and Intel have announced projects with significant technological value creation potential in Vietnam. The ascent of Vietnam to a regional technology hub for semiconductors and electronics does not solely depend on its geopolitical position but also requires institutional reforms for a favorable investment climate, independent and sustainable supply chains, better infrastructure, a well-trained workforce, and strict adherence to international trade rules.
Moreover, the Deputy Prime Minister Ho Duc Phoc announced the purchase of 250 Boeing aircraft, several military aircraft, U.S. liquefied natural gas worth six billion dollars, and other goods and equipment totaling over 90 billion dollars. This move underscores Vietnam's commitment to strengthening its ties with key trading partners.
The current trade war underscores the vulnerability of Vietnam's export-oriented growth strategy, which relies heavily on a few export markets. To mitigate this risk, Vietnam must continue to diversify its export markets and focus on building a robust domestic economy.
The Rosa-Luxemburg-Stiftung, an organisation focusing on cooperation, operates an overseas office in Vietnam, specifically in Hanoi. This office's presence underscores the importance of international cooperation in navigating the complexities of global trade and economic development.
