Vietnam may welcome more FDI from US allies in Trump 2.0: broker
More companies from U.S. allies and elsewhere may move more production facilities to Vietnam in the second term of Donald Trump as U.S. President, given the expected intensification of U.S-China trade tension, according to KB Securities Vietnam (KBSV).
Enterprises from South Korea, Taiwan, and Japan, which are deemed close allies of the U.S. in the Asia-Pacific region and currently account for more than 50% of Vietnam's export turnover to the U.S., are forecast to move production stages to Vietnam.
However, KBSV pointed out that the majority of large FDI enterprises from these economies still import many components (over 50%) from production facilities in China to Vietnam. If Trump wants to tighten origin tracing, these firms may have to continue to move some production stages to Vietnam.

Vietnam’s then-Party General Secretary and President Nguyen Phu Trong shakes hands with U.S. President Donald Trump in Hanoi, February 27, 2019. Photo courtesy of the government’s news portal.
In addition, the escalation of the trade tension between the two largest economies will prompt multinational corporations to move production bases out of China to hedge risks. “This trend may not be as strong as the 2018-2022 period with typical examples such as Apple, Intel, Foxconn, Lego, and Sumitomo Wiring Systems, but it continues,” said KBSV analysts.
The main export items of these FDI enterprises are expected to maintain their growth potential. Consumer electronics and hi-tech equipment were not subject to tariffs in the 2018 trade war. According to a research by Peterson Institute for International Economics, these items enjoyed tax incentives during both the Trump (2018-2021) and Biden (2021-2024) administrations.
KBSV analysts added that several key export industries of Vietnamese enterprises, especially textile and garment, can increase their competitiveness with Chinese goods when exporting to the U.S.
Although the U.S. may impose 10-20% tariffs on Vietnamese textiles, the actual impact will not be too worrying compared to the current tariffs (8-25%). In fact, a tariff of 10-20% is still much more competitive than the 60% tariff that China – one of the main competitors of Vietnamese textiles – faces. However, this benefit will be shared among several other countries that are strong in processing.
Negative impacts factored in
On the other side, KBSV pointed out several negative impacts of the Trump 2.0 administration on the Vietnamese economy. Among them, FDI firms from China, which account for about 20-30% of the total, may slow down operations.
“Escalating trade tensions will make it difficult for these businesses to maintain export activities to the U.S. In addition, new FDI disbursement from China may also be limited,” said KBSV.
Furthermore, the U.S. may impose higher anti-dumping duties on imports from Vietnam. “As the U.S. trade deficit with Vietnam is growing, this is an obvious risk.”
The export activities of some domestic enterprises showing signs of Chinese goods evading origin may be affected. Some typical examples in this group are plastics, iron and steel, and wood. However, this risk has been factored in the past several years.

The Trump administration may impose higher anti-dumping duties on imports from Vietnam. Pictured is Quy Nhon Port in Quy Nhon town, Binh Dinh province, central Vietnam. Photo courtesy of Quy Nhon Port JSC.
The analysts said the Vietnamese dong may risk depreciating further due to the appreciation of the U.S. dollar. Tariff measures on imported goods and fiscal support policies will cause inflation risks, and the Fed may be more cautious with the rate cut roadmap, while the U.S. Treasury yields are high.
“All of these factors will strengthen the uptrend of the USD. In the short term, a stronger USD will increase the risk of depreciation for the VND. In addition, Vietnam's forex reserves are touching its lows of about $87 billion (nearly equal to three-month import value), which will cause many difficulties to the SBV’s exchange rate management,” they added.
Overall, the analysts expect the benefits of increased exports and FDI inflows from the U.S.’s allies to offset the decline in FDI from China and products with signs of origin evasion.
In addition, they assess that the level of impact will largely depend on foreign policy and measures to help reduce the bilateral trade deficit such as the government's signing agreements to buy LNG and aircraft from U.S. manufacturers.
Vietnam-focused fund manager VinaCapital said earlier this month that there is no risk that Trump’s election will derail Vietnam’s healthy economic trajectory and that the tariff threat has been “overblown.”
VinaCapital reckoned that China is the focus, not Vietnam in case of any trade confrontation. Trump initiated the U.S.-China trade war and Biden essentially continued it, making it clear that both U.S. political parties view China as a strategic competitor to the U.S.
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