US tariffs to greatly challenge Vietnam's economic growth: ADB

Recent U.S. announcements on tariffs, along with other global uncertainties, could pose significant challenges to Vietnam's growth this year, said ADB country director Shantanu Chakraborty.

The evolving global economic environment, significantly affected by recent tariff-related announcements by the U.S. and geopolitical tensions, is posing significant challenges for economies dependent on export-driven manufacturing like Vietnam, ADB stated in a release on Tuesday.

"External uncertainties - such as tariff escalations, reciprocal measures, the prolonged war in Ukraine, and ongoing instability in the Middle East - could constrain near- to medium-term global economic growth. Moreover, a slowdown in the U.S. and China, Vietnam's major trading partners, could further affect economic prospects," the bank wrote.

Chakraborty said the Vietnamese Government has initiated an ambitious plan to boost growth, which can help mitigate the significant external risks.

“Higher and sustainable economic growth is possible if ongoing, extensive institutional reforms are implemented swiftly and efficiently. Such reforms would stimulate domestic demand, increase governance efficiency in the near term, and consequently promote private sector development over the medium and long term,” he commented in the release.

The bank highlighted that enhancing Vietnam's participation in global supply chains is a critical policy challenge for the country's development. As global economic dynamics evolve, the country's advantages in value addition to global supply chains are also shifting.

"It is important to understand the limitations and challenges associated with broadening its participation in and increasing its added values to global supply chains, to improve the country's economic trajectory and long-term growth potential," ADB added.

In its Asian Development Outlook April 2025 report release on Wednesday, the bank forecasts Vietnam’s economy will expand 6.6% in 2025 and 6.5% in 2026, following a robust 7.1% growth last year.

However, the forecast had been finalized before President Trump on April 2 announced he will levy massive 46% tariffs on imports from Vietnam as part of a new wave of global impositions.

Prime Minister Pham Minh Chinh on Sunday affirmed the government will not alter its GDP growth target of at least 8% for 2025, while seeking solutions to deal with U.S. tariffs if they are enforced.

The government recently raised its 2025 growth target to at least 8% (from 6.5-7%), with a higher inflation expectation of 4.5-5% to create room for monetary policy flexibility.

Vietnam's economy expanded 6.93% in the first quarter of the year, the highest growth since 2020, the General Statistics Office reported on Sunday. The consumer price index (CPI) in the first 3 months increased by 3.22% compared to the same period in 2024.

According to Maybank's release on Friday, the GDP growth downgrades are larger for Vietnam (-1 percentage point) and Malaysia (-0.6 percentage point) after President Donald Trump's tariffs.

Maybank said that export and investment growth will likely be lower than previously projected given Trump's sweeping reciprocal tariffs on about 180 countries, including ASEAN.

Deputy Prime Minister Ho Duc Phoc, accompanied by corporate executives, is making a working visit to the U.S., starting April 6, for tariff negotiations.

Strong trade, a recovery in export manufacturing, and robust FDI fueled Vietnam’s economic growth in 2024, according to ADB's Chakraborty.