Hope for the better but prepare for the worst amid US tariff concerns: Maybank

A tariff of 20-25% is the best case, which puts Vietnam in line with Japan, South Korea, and the EU, and a 46% worst case would force the economy to undergo immediate structural changes, according to Maybank's release on Friday.

Maybank said is hopeful of a favorable tariff reduction after 1-2 months. Meantime, Vietnam needs to leverage fiscal and monetary tools to mitigate the impact of tariffs imposed by President Donald Trump.

In the long term, Vietnam is likely to remain a favored destination for FDI with more diversified export markets and a stronger domestic private sector, the bank noted.

It analyzes three tariff scenarios: a 30-35% base case, a 20-25% best case, and a 46% worst case which would lead to the benchmark VN-Index being at 1,230, 1,410, and 1,000 points at end-2025, respectively.

Vietnam’s Party General Secretary To Lam made an immediate call to President Trump shortly after he had imposed 46% tariffs on Vietnam, suggesting a trade agreement.

In addition to Vietnam’s potential procurement of $86 billion of U.S. goods and services and willingness to remove all tariffs on imports from the U.S., non-tariff measures (for instance, technical barriers for pharmaceuticals and food imports, restrictions on foreign participation and ownership in telecom and banking services, and weak intellectual property protection) are key concerns of the United States Trade Representative (USTR) and may need to be eased for Vietnam to reach a deal, Maybank noted.

Based on this, the bank presents three scenarios. First, a 30-35% base case tariff, which helps Vietnam remain competitive with regional FDI rivals like Indonesia, Thailand, India, and Bangladesh.

Second, a 20-25% best case, which puts Vietnam in line with Japan, South Korea, and the EU and allows it to remain an FDI darling.

Third, a 46% worst case, which forces the economy to undergo immediate structural changes. Trump has indicated an openness to negotiations, and Maybank said it hopes to see a tariff reduction within the next 1-2 months.

Expecting resilient FDI inflows

According to Maybank, FDI inflows and trade are the primary concerns. FDI companies generate more than 70% of Vietnam’s exports and employ about 10% of the labor force.

Therefore, a 46% U.S. tariff would directly hurt Vietnam’s exports and indirectly impact local consumption. However, the new tariff gaps between that imposed on Vietnam and regional competitors in textiles and footwear (India, Bangladesh, Indonesia, Pakistan, Cambodia, and Thailand) range from 0% to 20%, and this could narrow.

Moreover, in addition to 17 effective FTAs, the core advantages of Vietnam are established hubs for electronics manufacturing, textiles, and footwear; a large and under-penetrated consumer market with a population of 100 million; and a low-cost, skilled, and abundant labor force, which are likely to make FDI investors reconsider moving elsewhere.

"In the short term, more coordinated fiscal and monetary policies will be necessary to mitigate the impact of the tariffs. Given the elevated FX pressure, we expect market interest rates to remain flat in the next 6-12 months. In the long term, the economy will need to diversify its export markets and strengthen its domestic private sector to grow sustainably," Maybank added.