Vietnam sets up 'quick reaction force' as US announces massive 46% import tariff

Prime Minister Pham Minh Chinh has requested the immediate establishment of a rapid reaction force, following President Donald Trump announcing that the U.S. will impose reciprocal tariff of 46% on goods imported from Vietnam.

The team will be headed by Deputy Prime Minister Bui Thanh Son. The massive tax levy is part of a new wave of global impositions announced on Thursday.

The Vietnamese cabinet leader on Thursday morning chaired a meeting with leaders of the ministries of Finance, Industry and Trade, Agriculture and Environment, and Science and Technology, the State Bank of Vietnam, and many other agencies.

"Vietnam wants the U.S. to have more suitable policies given the good relations between the two countries, and the conditions and circumstances of Vietnam as a developing country which must continue to overcome the severe and prolonged consequences of many years of war," he noted at the meeting.

The U.S. will impose reciprocal import tariffs on more than 180 trading partners. About half of the economies will be subject to a common tariff of 10%, effective April 5. Major trading partners of the U.S. will be subject to higher tariffs of up to 50%, effective April 9.

The 46% tax imposition for Vietnam is among the highest, only after Laos (48%) and Madagasca (47%). It is higher than many others like Sri Lanka and Myanmar (44%), Bangladesh (37%), Thailand (36%), mainland China (34%), Taiwan (32%), India (26%), South Korea (25%), Japan and Malaysia (24%), the EU (20%), and the Philippines (17%).

The Prime Minister requested ministries and sectors to "have proactive and flexible responses to all developments". He assigned Deputy Prime Minister Ho Duc Phoc to direct ministries and sectors in this matter and record opinions from businesses, especially large exporters.

He emphasized that the current situation shows that trade competition is fierce, complicated and unpredictable. But he noted that this is also an opportunity to restructure the economy towards rapid but sustainable development, based on technology and innovation.

According to the Prime Minister, Vietnam has the opportunity to build an independent and self-reliant economy associated with deep, substantive and effective international integration.

Along with that, Vietnam can expand and diversify products and supply chains, promote and exploit the domestic market. "The GDP growth target of 8% or more in 2025 remains unchanged," he added.

The groups of goods to be affected by the U.S. tax policy include seafood, plastics, rubber, wood, pulp and paper, textile, footwear, machinery, equipment, components, machinery and equipment, and electronics, according to Do Ngoc Hung, Vietnam trade counselor in the U.S.

As Vietnam is in the group of countries subject to highest tax rates, the imposition will reduce the competitiveness of Vietnamese goods.

According to Vietnam Customs, in 2024, Vietnam exported goods worth $119.5 billion to the U.S. and spent $15.1 billion on imports from this economy. There were 15 items with billion-U.S. dollar export turnovers, of which three dominant groups were computers and components ($23.2 billion), machinery and equipment ($22 billion), and textile ($16.2 billion).

Phones, wood, and footwear were also the items that recorded great export values, in the range of $8.3-9.8 billion. Agricultural products also made important contributions, such as cashew nuts and seafood with $1.15 billion and 1.83 billion, respectively, and coffee with nearly $323 million.

In this context, Hung said that Vietnam needs to effectively implement cooperation mechanisms and bilateral agreements with the U.S., such as the Vietnam-US Trade and Investment Framework Agreement (TIFA) and the Vietnam-US Bilateral Trade Agreement (BTA). The country needs to specifically increase the import of some of the U.S.'s strong products in line with domestic demand.

Vietnam also needs to increase attracting US businesses to invest in strategic fields and products where they have advantages and where the two countries have demand. This is in the direction of increasing the content and proportion of U.S. origin in products.

U.S. Treasury Secretary Scott Bessent had previously told Senate Republicans that reciprocal tariffs would be the “ceiling” levels for the U.S. to impose on countries. This levels could be reduced if trading partners meet the Trump administration’s demands.

However, some products will not be subject to reciprocal tariffs. For example, aluminum, steel, cars and car parts will continue to be subject to a 25% tariff as before. Similarly, gold, copper, pharmaceuticals, semiconductors, timber and some energy and mineral products not found in the U.S. will also not be subject to the reciprocal tariffs.

The tax rate is "terrible"

When the massive tax rate is applied, both Vietnamese goods exported to the U.S. and FDI flows into the country will be impacted. Many associations and businesses have expressed their serious concern about the new tax rate.

Nguyen Minh Duc from the Legal Department of the Vietnam Chamber of Commerce and Industry (VCCI) calculated that if the export turnover from Vietnam to the U.S. remains unchanged ($119 billion per year), Vietnam's goods will have to pay about $54.74 billion in taxes, equivalent to more than 10% of Vietnam's GDP.

To be worse, the tax rate on Vietnamese goods is much higher than that of other countries that are Vietnam's competitors, like Thailand with 36%, India 26%, Indonesia 32%, Malaysia 24%, Bangladesh 37%, the Philippines 17%, and Pakistan 29%.

This means Vietnamese goods will be subject to a tax about 10-20% higher than the main competitors for main items including electrical appliances, electronics, textile, footwear, and furniture, he told local media.

Chairman of the Ho Chi Minh City Textile, Garment, Embroidery and Knitting Association Pham Xuan Hong also expressed his concern, adding that his association and businesses were discussing and making further assessments to come up with a response plan.

"If this tax rate is applied, it will cause difficulties for Vietnamese textile and garment because the import tax for Vietnam is the highest, only after Laos. Therefore, we are worried and will continue to monitor the situation," local media quoted Hong as saying.

Meanwhile, Ngo Sy Hoai, vice chairman and general secretary of the Vietnam Timber and Forest Products Association, commented that the tax rate is "terrible". He said he hopes that Vietnam can negotiate.

According to Hoai, the wood industry is currently subject to U.S. investigations under the Section 232 of the Trade Expansion Act of 1962. Therefore, it may not be subject to this tax in the immediate future, but it is impossible to predict the possibility of a tax after the investigations.

Therefore, businesses need to find ways to sell goods before the investigation conclusion is issued and before the tax enforcement to reduce damage. They should also find ways to restructure operations to reduce damage, he told local media.

However, some experts argued that the U.S.’s 46% tariff imposition on imports from Vietnam, effective from April 9, is not as alarming as it seems, as the situation will ultimately depend on the negotiations between the two parties.