Business confidence in Vietnam drops to 44-month low over US tariff concerns: S&P Global

Business confidence in Vietnam dropped sharply in April to the lowest since August 2021, as manufacturers were concerned about the impact of U.S. tariffs on production in the months ahead, according to S&P Global.

The level of optimism was one of the weakest in the series history, the firm said in a release on Monday.

"The imposition of tariffs by the U.S. knocked the Vietnamese manufacturing sector into contraction during April, with firms seeing marked reductions in new orders, exports and production," said Andrew Harker, economics director at S&P Global Market Intelligence.

"What's more, the potential for further disruption to the sector as a result of additional tariffs meant that business confidence slumped and was one of the lowest on record," he added.

A lack of demand meant that firms continued to lower their selling prices, while input costs rose only slightly.

The S&P Global Vietnam Manufacturing Purchasing Managers' Index (PMI) dropped back below the 50.0 no change mark in April, after having signalled growth for the first time in four months during March.

At 45.6, the latest reading was down from 50.5 and signalled a marked monthly deterioration in the health of the sector.

Respondents indicated that the drop in new orders reflected the introduction of tariffs by the U.S. and fluctuations in international market conditions.

New export orders fell even more quickly than total new business amid the declaration of tariffs. The sixth successive decrease in new business from abroad was the most marked since June 2023, S&P Global reported.

Backlogs of work fell sharply amid lower new orders, with the rate of depletion broadly in line with that seen in the previous month.

Lower workloads led manufacturers to scale back employment, the seventh month running in which this has been the case.

Furthermore, the pace of job cuts was the steepest for three-and-a-half years. Firms also reduced their purchasing activity sharply in response to lower new orders and declining output requirements.

Input buying was down for the second consecutive month, and to the largest degree since May 2023. In turn, stocks of purchases were also down, and to the largest extent since last September.

Reduced demand for inputs meant that suppliers' delivery times lengthened only marginally in April, and to the smallest degree in eight months.

That said, there were some reports of delivery delays amid issues with the speed and availability of transportation. A weakening demand environment also impacted prices in April.

While input costs continued to increase amid rises inthe price of some raw materials, the pace of inflation was only slight and the weakest since the current sequence of increasing operating expenses began in August 2023.

Some firms mentioned lower costs for oil and transportation. Selling prices decreased for the fourth consecutive month. Although modest, the pace of reduction was the sharpest in 21 months.

President Trump on April 2 said that he would levy massive 46% tariffs on imports from Vietnam as part of a new wave of global impositions, effective from April 9.

Trump on April 9 dropped his reciprocal tariffs for countries reaching out to the U.S. to negotiate to 10% for 90 days. The 90-day reprieve is applied to nearly 90 nations except for China.