US Tariff Challenges for Vietnam

Perspective

US Tariff Challenges for Vietnam

January 15, 2025-2 min-

In the trade war, the Trump administration will impose a 60% tariff on imports from China and a general tariff of 10-20% on all imports from other countries, including Vietnam. According to political and economic consulting institutes, increasing tariffs on consumer goods will increase US inflation, and will affect Vietnam’s export prospects as the US accounts for about 29% of Vietnam’s export turnover, being the largest export market (104 billion surplus for Vietnam in 2023).

The US continues to consider Vietnam as not meeting the standards of a market economy. In 2023, the US conducted 59 investigations on dumping, subsidies, origin, quality, food safety. related to Vietnamese goods.

What are the advantages for Vietnam?

The US-China trade war will affect FDI attraction in Vietnam, with many large companies from Japan, Korea, Taiwan, and the US gradually reducing FDI investment in China and moving production chains to Vietnam. Investment decisions depend on the long-term strategy of the investor as well as the core values that are favorable for the profits that the country receiving the investment brings.

Vietnam’s attractive investment environment, new-generation free trade agreements, low labor costs, as well as its strategic geographical location will be advantages that help Vietnam maintain its attractiveness to FDI flows in the future. To prepare for changes in US trade policy, Vietnam needs to strengthen its position as a reliable trade partner through increasing transparency in the trade sector, respecting trade agreements in terms of the ILO’s basic conventions, to ensure fair competition when workers are not forced to reduce wages.

Vietnam also needs to make recognized efforts to reduce the US trade deficit with Vietnam through increasing imports, negotiating and signing major trade agreements, such as those related to LNG gas, purchasing aircraft from US manufacturers, allowing US banks and telecommunications companies to open branches and operate in Vietnam. At the same time, to minimize the risk of becoming a transit center for Chinese exports to the US, Vietnam needs to continue implementing trade defense measures to deal with Chinese goods showing signs of “avoiding US taxes”.