Why Vietnam's Economy is in Danger from Trump's Tariffs

Vietnam's economy is highly export-driven, meaning that it depends a lot on selling goods to other countries. This helps the country earn money and create jobs. The biggest destination for Vietnamese exports, however, is the United States. If we graph out the exports of Vietnam by country, we get to see just how big of a market the US is to Vietnam. Here in the graph, you can see that for the year 2023, the United States is the biggest market, contributing over $118 billion in exports for Vietnam. That is only followed by China, with over $85.7 billion. But as you can see in the graph, no other country comes close to the United States when it comes to Vietnamese exports. The reason here is simple, and that's because the US is one of the world's biggest consumers. American companies and shoppers buy a lot of products made in Vietnam, especially electronics, clothes, and furniture. Many big global brands also have their products made in Vietnam and then ship them to the US. But over the past few months, there's a big problem that arose, and that is President Donald J. Trump. Trump, as some of you may know, has emerged as a rather controversial figure when one talks about trade. The reason? Because Trump has a history of pushing for trade protectionism, putting tariffs or taxes on goods coming into the US to protect American industries. And indeed, one of the biggest changes that has happened in the past few days, as of the time of writing, is that Trump has announced sweeping reciprocal tariffs on many trading partners. And Vietnam was hit with one of the steepest rates. Here's a graph on some select countries that are hit with the US reciprocal tariff. Here on the graph, you can see that Vietnam is being charged a 46% reciprocal tariff by the United States. That's one of the highest among all countries listed, second only to Cambodia at 49%. For comparison, China faces a 34% tariff, while the European Union is at 20%. Even countries like Thailand, 36%, and Bangladesh, 37%, are facing lower rates than Vietnam. This move came as a shock to Hanoi. The 46% duty is roughly half of what the US claims is Vietnam's non-reciprocal treatment. The US alleged Vietnam effectively imposed approximately 90% barriers on US goods. Vietnamese officials vehemently rejected that figure, noting Vietnam's average MFN import tariff is only 9.4%, a far cry from 90%. They labeled the US tariff unfair and lacking a scientific basis. So, what's the problem with these reciprocal tariffs? Well, it's the fact that they are applied to most Vietnamese exports, except a few strategic commodities. According to the US announcement and Vietnamese authorities, certain goods were exempt. For instance, items already under other tariffs or needed inputs like semiconductors, steel, aluminum, autos, gold, energy products. But crucially, Vietnam's key export industries, electronics and textiles, apparel, are not exempt and now face the punitive 46% rate. These sectors had previously enjoyed either low normal US import tariffs or duty-free access. But now that they have over 46% in tariffs slapped on them, the game has changed completely. For Vietnamese electronics and textile companies, this is a major blow. These two sectors are the backbone of Vietnam's export economy. Together, they account for billions of dollars in annual trade and employ millions of workers. To show you what we mean, let's graph out the largest export by category of Vietnam to the United States. Here you can see that Vietnam's exports are largely because of electrical machinery and electronics, which contributes over $42.7 billion in Vietnam's total exports to the US. That is a 36.3% share. What are these types of products, you ask? Well, think of smartphones, computer parts, televisions, and even components used in data centers. These are high-demand items in the US, and many American brands rely on Vietnamese factories to supply them. In fact, a big portion of products from companies like Apple, Dell, and Samsung, which manufactures in Vietnam, fall under this category. Now, these products, which are manufactured in Vietnam and exported to the US, are now slapped with 46% tariffs. What does that mean to Vietnam's economy then? Well, the biggest problem here is that Vietnam's electronics industry could be at risk. As the hub for many electronic firms globally, a 46% import duty will drastically raise the landed cost of Vietnamese electronics in the US, making them far less competitive. American buyers of Vietnamese-assembled electronics may shift orders to other countries not subject to such high tariffs. For example, if a Vietnamese-made smartphone's cost to US importers jumps nearly 50%, companies might consider sourcing from Thailand or Malaysia, facing 36% and 24% tariffs respectively. This could mean lower foreign investments for Vietnam. But the biggest problem here is that Vietnam's trade balance with the United States could go down the drain. What does this mean? Well, let's graph out the US-Vietnam trade balance, data from the US Census Bureau. Here in the graph, you can see that in every single year, Vietnam has always been at a positive, whereas the US at a negative. In the year 2024, for instance, the trade balance of the United States with Vietnam was a massive deficit of $123 billion, which simply means that the US imported $123 billion more in goods from Vietnam than it exported to Vietnam. That's a huge gap, and it's exactly the kind of number that tends to catch the attention of politicians like Trump, who argue that such imbalances are unfair and harmful to the American economy. So, what could go wrong with this trade balance? Well, it could easily hit Vietnam's economy hard if the US decides to keep these tariffs in place for a long time. With higher costs on Vietnamese goods, American buyers might start looking elsewhere, to countries like India, Bangladesh, or Mexico, to source the same products at cheaper prices. If that happens, Vietnam's exports to the US will drop, and so will its trade surplus. To put this into perspective, let's pull up the graph on Vietnam's net trade in goods and services. What this graph basically shows is that Vietnam has consistently maintained a positive net trade position, meaning it exports more than it imports overall. This surplus has been a key driver of its rapid economic growth over the last two decades. The money earned from exports not only boosts GDP, but also helps the government invest in infrastructure, education, and social services. For 2023, Vietnam had a net trade in goods of over $35 billion, and that is a massive figure. If US tariffs were put in place for a very long time, then it could spell disaster for Vietnam's economy. But what's going to get hit more is Vietnam's foreign reserves. If we graph Vietnam's foreign reserves, we get to see that Vietnam doesn't actually have a lot of foreign reserves. For 2023, they only have $92.24 billion, which means that Trump's tariffs could put real pressure on Vietnam's ability to maintain economic stability. $92.24 billion in foreign reserves may sound like a lot, but in the world of international trade and currency defence, it's relatively modest, especially for an export-heavy economy. Secondly, another big risk that Vietnam would obviously face is their GDP growth. Prior to this tariff shock, Vietnam was one of Asia's fastest-growing economies, growth 7.1% in 2024 and a government target of 8% for 2025. These targets are now at risk. Economists have begun trimming forecasts due to the tariff impact. The World Bank, for example, projected 2025 growth at 6.8%, below Vietnam's official 8% goal, and warned that US tariff imposition on trading partners is a clear downside risk to Vietnam's outlook. Thirdly, you must also understand that when you combine the electronics and textile footwear sectors, they provide millions of jobs in Vietnam. A collapse in US orders could force factories to reduce shifts or close lines, directly hitting workers' incomes. This has broader effects on poverty reduction efforts and domestic consumption. Now, while all may seem disastrous, not all is lost. While Hanoi has labelled the US move as unfair, they are seeking dialogue. Vietnam's Ministry of Industry and Trade sent a diplomatic note to Washington requesting a temporary suspension of the tariffs and urging further talks. High-level communications are ongoing. Vietnam's Prime Minister Pham Minh Chin convened an emergency cabinet meeting on April 3rd, 2025, the day after the announcement, and stated Vietnam would engage in bilateral discussions to resolve the issue. Furthermore, even before the tariffs took effect, Vietnam took steps to reduce its own tariffs on US imports. On March 26th, 2025, a week prior to the US deadline, Vietnam's Ministry of Finance announced a decree to cut MFN import duties on various US products. For example, Vietnam eliminated or lowered tariffs on items important to US exporters. Wood products' tariffs were cut from 20% to 0%, and other categories saw 2 to 25% point reductions. Vietnam is also ramping up purchases of US goods via state-owned companies. During a late 2024 visit to the US, Vietnamese firms signed deals to buy $54 billion in US products, from aircraft to commodities, in coming years. To put simply, the Vietnamese government is indeed doing some work to mitigate these. But anyway, do let us know what you think. Thanks for watching.