Vietnam faces US tariff shock: What's next for exporters and the broader economy?

By Dr Chu Thanh Tuan
Mon, April 7, 2025 | 1:14 pm GMT+7

Vietnam finds itself at the epicenter of a trade policy earthquake with President Trump's policies, but with coordinated action and long-term vision, the country could turn crisis into opportunity, wrote Dr Chu Thanh Tuan, associate program manager of undergraduate business programs at RMIT University Vietnam.

Dr Chu Thanh Tuan, associate program manager of undergraduate business programs at RMIT University Vietnam. Photo courtesy of RMIT.

Dr Chu Thanh Tuan, associate program manager of undergraduate business programs at RMIT University Vietnam. Photo courtesy of RMIT.

How the latest U.S. tariff framework impacts Vietnam

U.S. President Donald Trump on Wednesday announced a sweeping tariff framework during what the White House called a “Liberation Day” proclamation. The new policy will impose a baseline 10% tariff on nearly all countries effective April 5, followed by targeted increases of up to 30-40% from April 9, with a potential 46% rate applied to Vietnamese goods.

This move represents the most protectionist shift in U.S. trade policy in recent memory, and Vietnam stands directly in the firing line.

The direct impact on Vietnam is significant. The country’s largest export sectors, including textiles and garments, electronics, footwear, seafood, and furniture, are all heavily reliant on the U.S. market. With nearly 30% of Vietnam’s total exports destined for American consumers, the introduction of tariffs ranging from 10% to 40% could erode price competitiveness, trigger order cancellations, and compel businesses to either absorb margin losses or shift production elsewhere.

However, the consequences are not confined to direct exporters. This morning, a neighbour of mine, a CEO of a yarn manufacturing company that does not export to the U.S., said: “We don’t ship to America, but this tax is crushing our industry.”

His concern reflects broader anxiety across the business community – that tariffs imposed on Vietnamese exports to the U.S. may trigger disruptions throughout supply chains, raise input costs, and reduce demand across a wide range of domestic sectors.

These compounding effects culminated in a sharp market reaction. On the morning of the announcement, the VN-Index dropped nearly 80 points, equivalent to around 6% by 10:50 a.m., highlighting just how deeply these tariff measures are shaking not only exporters, but also broader investor sentiment and business confidence across industries.

The indirect impacts are just as concerning. They include supply chain disruptions, as U.S. buyers reduce orders or demand price renegotiations; reduced foreign direct investment, particularly from manufacturers focused on export-driven growth; ripple effects on domestic sectors such as logistics, finance, packaging, and compliance and currency volatility, stemming from investor uncertainty and macroeconomic pressure.

As these challenges unfold, Vietnam now faces a critical juncture which demands a strategic and coordinated response to safeguard its economy and maintain its position in global trade.

Vietnam’s strategic response: What should be done now?

In light of the escalating impacts of the U.S. tariff measures, Vietnam is now navigating a tightrope. The country’s record $123.5 billion trade surplus with the U.S. in 2024 makes it a prime target for the so-called “reciprocal” tariffs. While Vietnam has benefitted from supply chain shifts out of China, this very success has also drawn increased scrutiny.

Importantly, Trump’s tariff decisions are driven not only by economic considerations but also by political messaging – a demonstration of strength aimed at his domestic base. Vietnam’s response, therefore, must be both tactical and strategic, spanning immediate diplomatic efforts, mid-term restructuring, and long-term institutional reform.

About short-term actions, Vietnamese interprises should speed and coordination to mitigate the immediate fallout, both government and businesses must act quickly and cohesively. The following actions should be prioritized in the coming days and weeks.

Secondly, Vietnamese firms should immediate diplomatic efforts. Last Thursday, Prime Minister Pham Minh Chinh chaired an urgent meeting with leaders of key ministries in response to the U.S. decision to impose a 46% tariff on Vietnamese goods.

At the meeting, he ordered the formation of a rapid response task force and directed relevant ministries to coordinate and collect input from major exporters. In the upcoming meetings led by Deputy Prime Minister Ho Duc Phoc during his current visit to the U.S., as well as in subsequent inter-ministerial discussions, it is crucial for Vietnam to emphasize its strategic economic role for U.S. companies operating locally and to propose targeted mitigation measures by sector to prevent widespread fallout.

In the medium term, Vietnam should strengthen its trade ties within the CPTPP, EVFTA, and RCEP to tap into large consumer markets with preferential access. Countries such as Japan, Canada, and the EU present strong alternatives to the U.S. market. Besides that they should adjust production chains: Increasing local value-added steps and reducing dependence on intermediate goods from China – which are often flagged in U.S. customs inspections – will be critical. Upgrading origin tracing systems and investing in compliance technology will support this effort.

Finally, long-term resilience will require institutional reform to ensure Vietnam is better equipped to handle future global trade tensions. Two areas should be prioritized, including customs enforcement and transparency. Vietnam must strictly enforce rules of origin to prevent the transshipment of Chinese goods through its territory. U.S. trade authorities are highly sensitive to this issue, and failure to act could result in further penalties.

Vietnam should establish a trade risk response unit that involves both public and private sectors. This team would monitor developments, model economic impacts, and facilitate coordinated policy responses in a timely and strategic manner.

Integrating these institutional mechanisms will allow Vietnam to shift from reactive policymaking to proactive, forward-looking governance. This enables the country not only to weather the current storm, but also to strengthen its role in the global trading system.

Understanding the shock and responding with strategy

To formulate an effective response, it is essential to view this tariff escalation through a strategic lens. President Trump’s typical approach is to lead with shock – announcing steep tariffs of 30%, 40%, or even 60% – and then use those threats as leverage to negotiate more favourable terms. The real aim is often to make a 10% baseline appear moderate and acceptable in comparison.

Recognizing this tactic is critical. Rather than reacting with panic, Vietnam must respond with clear-eyed, coordinated strategy. Delays or hesitations could be interpreted as passivity, weakening the country’s negotiating position. Instead, Vietnam should act early, assertively and constructively – pursuing exemptions or reductions through targeted diplomacy and mutually beneficial trade concessions.

This moment presents more than just a test of resilience; it is also a potential turning point. Vietnam is entering one of its most complex trade environments in decades. Yet with the right approach, this disruption could serve as a catalyst for long-term transformation.

A strategic path forward should therefore include:

· Government-led diplomacy at the highest level

· Private sector agility and risk planning

· Public messaging to both US and domestic audiences

· Long-term reforms to improve trade transparency and institutional capacity

If these elements are aligned and implemented decisively, Vietnam can not only weather the storm but also emerge stronger, more competitive, and better positioned for a diversified and sustainable future.

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