Vietnam Navigates Trump’s Trade Headwinds: Making Virtue Out of Necessity

INTRODUCTION

In his first two months back in the White House, President Trump has aggressively wielded tariffs to bend other countries to his will. Canada, Mexico, China and the EU have thus far borne the brunt of Trump’s tariffs, but anxiety is mounting globally. Among Southeast Asian countries, Vietnam is particularly vulnerable as the country holds the third-largest trade surplus with the US in the world, after China and Mexico. Vietnam-US bilateral trade in 2024 neared US$150 billion, with Vietnam enjoying a substantial surplus of US$124 billion—more than triple the US$38 billion recorded in 2017. This sharp increase stems largely from the US-China trade war initiated during Trump’s first term, which accelerated the relocation of manufacturing from China to Southeast Asia—including by Chinese firms to bypass American tariffs.

With its trade surplus with the US now comprising nearly a third of its GDP, Hanoi must tread carefully to safeguard its economic gains. This article explores Vietnam’s ongoing considerations and proactive measures to mitigate the risk of becoming a prime target of Trump’s tariffs. These efforts include engaging with Donald Trump and his administration through both official and business-linked channels as well as making pre-emptive commitments to purchase more American goods and services to address the bilateral trade imbalance. Within Vietnam, policy discussions on addressing Trump’s tariff threats have also focused on tightening the enforcement of rules of origin and local content requirements to prevent ‘Vietnam washing’—the practice of rerouting goods through Vietnam to bypass US tariffs. At the same time, the Vietnamese government is actively courting investments by US companies, especially in high-tech sectors, aligning with its national drive to make science, technology, and innovation the key drivers of economic development. It contends that while navigating economic ties with the US under Trump 2.0 may bring short-term pains and disruptions, Vietnam should make strategic adjustments aimed at enhancing local content, strengthening domestic industry, and upgrading its position in global value chains—turning the coming trade headwinds into a catalyst for economic transformation.

THE IMPORTANCE TO VIETNAM OF TRADE WITH THE US

Vietnam’s economy has been thriving thanks to globalisation, with its trade per GDP ratio reaching 166% in 2023 – the second highest in the region, behind only Singapore. In 2024, it recorded the highest economic growth within ASEAN at 7.09%, driven particularly by robust export performance. Vietnam’s total export value in 2024 amounted to US$405.5 billion, equivalent to 85% of the country’s GDP, with nearly a third destined for the US, the country’s largest export market. Notably, Vietnam’s US$124 billion trade surplus with the US accounted for one-third of its US$476.3 billion GDP.

Vietnam’s trade with the US saw a significant surge during the first Trump administration and was sustained throughout the Biden administration, thanks to the rapid shift of supply chains away from China as a consequence of the US-China trade war. Between 2017 and 2024, Vietnam’s exports to the US grew at an impressive 16.7% annually, and the annualised growth rate of its trade surplus with the US in the same period was even higher, at 18.2%. This momentum has enabled Vietnam to sustain a streak of overall trade surplus over nine years, since 2016.

Vietnam’s Exports, Imports and Trade Surplus with the US (2017-2024, million US$)

Underlying these impressive figures, however, is an intricate trade relationship that Vietnam has with both the US and China. Vietnam relies heavily on raw materials and intermediate goods from China – its largest trading partner and top import source – for the production and/or assembly of final goods destined for the US. In 2024, Chinese value-added content accounted for an estimated 19% of Vietnam’s exports to the US. Moreover, Chinese firms have also been a key driver behind the surge of FDI into Vietnam between 2017 and 2024. China rose from being Vietnam’s 9^th largest investor in 2014 to 6^th in 2023 in registered FDI stock. In 2024, China was the third largest source of FDI inflows into Vietnam, with US$2.84 billion, accounting for 14.4% of the country’s total FDI inflows (this share would rise to nearly 25% when including investments from Hong Kong). Additionally, a significant portion of inflows from Vietnam’s top foreign investor, Singapore, can be traced back to Chinese sources, further underscoring China’s deep economic footprint in the country.

Notably, Vietnam’s US$124 billion trade surplus with the US accounted for one-third of its US$476.3 billion GDP.

Given these complex linkages, Vietnam is often seen as a “trade conduit” and a “safe haven” for Chinese goods – whether “Made in China” and re-exported through Vietnam or “Made by China” via Chinese investments in Vietnam before reaching the US market. This dynamic drew scrutiny from the Biden administration, which imposed steep anti-dumping duties on solar panels manufactured by Chinese firms in Vietnam, alongside those from Malaysia, Cambodia, and Thailand, ranging from 20% to as high as 77%.

Under the second Trump administration, Vietnam’s status as a “safe haven” may no longer hold. Trump has aggressively imposed a range of tariffs on goods from countries with which the US runs large deficits; these include a 20% tariff on all Chinese goods, a 25% tariff on all US imports of steel and aluminium, and a 25% levy on imports from Mexico and Canada except in certain exempt sectors. Furthermore, Trump’s reciprocal tariff plan is expected to potentially introduce significant uncertainties and disruptions to global trade. Vietnamese experts estimate that under the baseline scenario (50% probability), the US could raise tariffs on Vietnamese imports to match Vietnam’s current 5.1% rate on US goods, up from the current 2.2% per WTO rules, which could add US$4 billion in duties. Under the negative scenario (25% probability), the US could impose a 10% tariff on imports from Vietnam, in line with Trump’s previous statements regarding universal tariffs, which could lead to a 1.5-2 percentage point decline in Vietnam’s overall export growth and a 0.2-0.3 percentage point drop in GDP growth in 2025.

Another key risk is that if the Trump administration intensifies punitive actions against Chinese-origin goods—focusing on firm nationality and ownership rather than just import location—then the restructuring of supply chains out of China to bypass US tariffs will no longer be a viable strategy for multinationals. Additionally, Trump’s propensity to use tariff threats as a foreign policy tool would introduce greater uncertainty for foreign companies weighing a move of supply chains to Vietnam, potentially disrupting the steady inflows of FDI that the country had enjoyed in recent years.

Of note, Vietnam is navigating global trade headwinds at a critical juncture of its national development. The country’s new leader, General Secretary of the Vietnamese Communist Party (VCP) To Lam, is driving an ambitious “new era” of economic transformation with very bold targets. Among these is the goal of ensuring an 8^% GDP growth in 2025 and double-digit growth from 2026 onwards over the next two decades; the vision is for Vietnam to become a developed high-income nation by 2045. To this end, he is pursuing a drastic overhaul of the country’s entire administrative system and political apparatus at the central, provincial and local levels, to tackle what he views as the greatest impediment to national development: excessive bureaucratic bottlenecks. Widely regarded as a pragmatic leader with an ambitious vision, To Lam distinguishes himself from his predecessors with a “fearless can-do spirit”—a trait reinforced by his current firm grip on the political system, built through years of power consolidation via an extensive anti-corruption campaign during his long tenure as Minister of Public Security (2016–2024).

In short, to achieve its ambitious growth targets, Vietnam’s economy must remain both export-oriented and investment-driven. This will necessitate maintaining stable and robust economic relations with the US, at least in the short to medium term.

To Lam is also working to position Vietnam’s economy for strong performance ahead of the 14^th VCP National Congress in early 2025, a pivotal moment for solidifying his leadership. Unlike previous National Congresses—held every five years with their respective political reports consistently emphasizing peace, cooperation, and development as the world’s mainstream, the 2026 congress will take place amid seismic shifts in the global economy and in world politics, characterised by the US-China strategic competition, the rise of economic nationalism and protectionism worldwide, the securitisation of economic interdependence, and the growing fragmentation of global supply chains. The Trade in Transition Report 2025 warns that “global trade may face its most turbulent era since the 1930s” and “the world of trade is no longer one of international rules but of mercantilist confrontation”. In a recent policy speech in Singapore, To Lam himself acknowledged the “unpredictable, rapid, and sudden changes” shaping the world today, pointing to “political turmoil and economic warfare” posed by major powers.

Given Vietnam’s ambitious economic goals and the political imperatives at play, maintaining stable and robust economic ties with the US is a top priority for its leadership. Achieving double-digit growth hinges on sustaining strong export performance and robust FDI inflows. It is estimated that for Vietnam’s GDP growth rate to reach 8% in 2025, its total foreign trade must expand by at least 12%. Simultaneously, the government has launched large-scale infrastructure projects to drive growth, including new railways, expressways, power plants, and airport expansions. These bold public investments have been facilitated by Vietnam’s low public debt at only 33.8% of its GDP in 2024—the lowest within ASEAN— driven in part by a declining share of foreign debt. Vietnam’s foreign debt-to-GDP ratio fell from 47.1% in 2019 to 32.7% in 2023, underpinned by a strong and sustained trade surplus. In short, to achieve its ambitious growth targets, Vietnam’s economy must remain both export-oriented and investment-driven. This will necessitate maintaining stable and robust economic relations with the US, at least in the short to medium term.

GEARING UP FOR THE TARIFF MAN

How to prevent and respond to potential tariffs by the Trump administration has become the subject of robust policy discussions in Vietnam in recent months, involving multiple industry stakeholders, economic experts and the government. Unlike China and some US allies, Vietnam has little room for retaliation if Trump levies high tariffs on its exports. With minimal imports from the US hovering at US$8 billion-13 billion between 2017 and 2024, Hanoi holds little leverage over Washington. This has intensified the urgency to diversify Vietnam’s export markets beyond the US—a strategy gaining greater traction in the ongoing policy discussions. However, this shift will take time and face stiff competition in an increasingly protectionist world. Meanwhile, the Vietnamese leadership appears to grasp keenly Trump’s transactional approach, and are employing deft and pragmatic manoeuvres to engage him and his administration.

Proactive engagement, pre-emptive offerings

Hanoi has proactively engaged President Trump and his administration through both official and business-linked channels, seeking to mitigate the bilateral trade imbalance through pre-emptive offerings of buying more American goods and services. The Vietnamese government is reviewing its duties on US goods and has encouraged the increase of import of US products, particularly liquefied natural gas (LNG), agriculture, aircraft, AI chips and high-tech products. These moves not only help address American trade concerns but also strengthen Vietnam’s economic interdependence with the key US industries prioritised by the second Trump administration. During a visit to Washington D.C. in March 2025, Industry and Trade Minister Nguyen Hong Dien and US Trade Representative Jamieson L. Greer witnessed the signing of multiple agreements amounting to US$4.15 billion in total value, including agreements for Vietnamese oil and gas companies to purchase more LNG, gas power plant equipment and service, and biofuels from various American counterparts. Beyond adopting the rhetoric of a “balanced and sustainable trade” relationship—an appeal to the Trump administration—the emphasis on the oil and gas sector in these deals also aligns with Trump’s commitment of revitalising the US fossil fuel industry.

Vietnam has also tapped into informal, business-linked networks, leveraging “commercial diplomacy” to cultivate goodwill with Trump and his inner circle through the signing of economic deals and corporate partnerships. A good example is a high-level delegation of Vietjet, Vietnam’s leading low-cost carrier, to the US in January 2025 to engage with American partners, culminated in a photo opportunity between the Chairwoman of Vietjet and then President-elect Trump at Mar-a-Lago. During the visit, Vietjet showcased its existing agreements valued at nearly US$50 billion with major US corporations such as Boeing, GE, CFM, Pratt & Whitney, and Honeywell, while also discussing potential partnerships worth an additional US$14 billion. The Vietnamese media praised Vietjet for improving the country’s trade balance with the US, hoping that this would help the country avoid the wrath of the “Tariff Man”.

Vietnam’s “commercial diplomacy” is also evident in the signing of an agreement in September 2024 between a private-owned Vietnamese company and The Trump Organization for a US$1.5 billion hotel and golf course project in Hung Yen Province, with the witness of then-presidential candidate Donald Trump. While the deal is a private business transaction divorced from government affairs, Trump’s personal stake in successful ventures in Vietnam arguably provides a potential insurance for the country against future trade risks. Although the specifics leading up to the deal are not known, one plausible theory is that a real estate project of this scale could not have proceeded without the backing of the Vietnamese government, and this could have been a way for Vietnam to hedge its interests with Trump even before the US presidential election outcome was known. As evidence, Vietnam’s Prime Minister Pham Minh Chinh recently met the General Director of the Trump Organisation’s Hung Yen project, during which Chinh promised to “conduct a thorough review to fast-track the project” and called on the Trump Organisation to “position Vietnam as a business base and expand its investment footprint in the country”.

Hanoi is also stepping up its “commercial diplomacy” with the Trump administration by easing foreign ownership restrictions in the telecommunications sector, following the National Assembly’s approval of pilot low-orbit satellite investments in February 2025. This regulatory shift would enable Elon Musk’s Starlink to operate in Vietnam without having to form a joint venture with a local entity—a key sticking point in its negotiations with the Vietnamese government. The move coincides with ongoing discussions on SpaceX’s proposed US$1.5 billion investment in the country. While Musk’s close ties to Trump and his influence in the current US administration may probably be a push factor, this policy shift also supports Vietnam’s broader strategy to modernise its telecom and internet infrastructure and expand broadband access, particularly in remote areas and offshore islands, where terrestrial networks remain limited. Beyond improving connectivity, this move could also enhance Vietnam’s internet security, offering an alternative digital infrastructure in light of growing geopolitical contestation over subsea cables. With China stepping up its control over cable networks within the Nine-Dash Line and the looming risks of subsea cable disruptions, ensuring resilient digital infrastructure through satellite-enabled services is important for Vietnam’s security going forward.

MAKING VIRTUE OUT OF NECESSITY

While pre-emptive offerings to address the trade imbalance with the US offer the most straightforward response to Trump’s transactionalism, pursuing absolute balance is neither realistic nor desirable; Vietnam’s exports remain too crucial to its economic growth. A more strategic response is for the Vietnamese government and businesses to seize this challenging moment to drive bold economic restructuring for long-term competitiveness and resilience. The goal is not merely to withstand four years of Trump 2.0 but to harness these disruptions as a catalyst for necessary policy and structural adjustments.

This would require, first of all, stricter adherence to rules of origin and higher local content to prevent Vietnam from being used as a “back door” for tariff circumvention into America. Many Vietnamese experts and business leaders emphasise the need to turn the looming tariff spectre into an impetus to strengthen “Made by Vietnam” in the supply chains, stepping up investment in production processes and technologies to increase local value-added. They also argue that while the government has tightened regulations on origin certification, stricter enforcement is needed. In this respect, Vietnam should collaborate more closely with the US on customs administration to investigate origin fraud and illegal transshipment and verify qualified origins and local value-added content. In this regard, the positive momentum of ongoing Vietnam-US customs cooperation under the 2019 Customs Mutual Assistance Agreement (CMAA), which provides US technical support and capacity building for Vietnam Customs, should be strengthened.

Alongside efforts to increase local content, Vietnamese businesses are also diversifying their supply sources to mitigate US scrutiny of Chinese-origin goods. This has long been a challenge for Vietnam’s industrialisation, given China’s geographic proximity and its dominance in supply chains that offers competitive prices and vast product ranges with scale. With the looming threat of US tariffs, both government policies and industry strategies are accelerating diversification. For instance, the textile sector—which depends heavily on Chinese imports for inputs while sending half of its exports to the US—has raised its localisation rate to over 50% and expanded raw material imports from alternative markets such as Pakistan and Thailand. These efforts not only help to reduce exposure to US-China geopolitical tensions but also mitigate risks associated with overdependence on China-centric supply chains, as experienced during the COVID-19 pandemic. 

The drive to develop domestic industries and climb the industrial value chain has gained greater urgency under the leadership of To Lam, who puts science, technology and innovation at the forefront of national development. Accelerating Vietnam’s industrialisation and modernisation has become a strategic imperative as the country seeks to escape the middle-income trap before its demographic dividend window closes by 2040. To this end, attracting high-quality foreign investments – particularly from US firms – would not only strengthen Vietnam’s industrial capacity but also integrate the country more deeply into American supply chains. While American investments in Vietnam remain modest compared to East Asian countries, ranking 13^th in terms of FDI stock in 2024, its potential for expansion is significant. Major American tech firms like Amkor, Marvell, Intel and Nvidia have announced new investments in the country and Elon Musk’s SpaceX reportedly urged its Taiwanese suppliers to relocate to Vietnam, signalling growing interest in putting Vietnam as a node in their supply chains. The Vietnamese government is actively courting these corporations, exemplified in its recent agreement with Nvidia to establish an AI R&D centre and an AI data hub in Vietnam. Attracting American firms is no small task since this requires improvements to Vietnam’s legal and regulatory frameworks, streamlining of its bureaucracy, human resource development, and infrastructure upgrading—efforts that the Vietnamese government is keenly making. The synergy between these drivers should create a virtuous cycle that strengthens both the country’s economy and its position within global supply chains.

CONCLUSION

Vietnam has been navigating the potential trade headwinds from the second Trump administration with pragmatism and opportunism, aligning with Trump’s transactional approach. The focus has been on fostering corporate partnerships, framing Vietnam-US economic ties as win-win instead of virtue-signalling on free trade. It has proactively engaged with the Trump administration through both official and business-linked channels, committing itself to increased purchases of US goods. Through necessary trade-offs and policy adjustments, Vietnam may not only avoid the worst impacts of Trump 2.0 but also accelerate critical reforms for economic transformation. These include diversifying sources of intermediate goods, strengthening enforcement of rules of origin, and securing a stronger position in US-led high-tech supply chains. If handled wisely, these challenges could serve as a catalyst for much-needed economic transformation, turning potential risks into opportunities for long-term growth and reform.

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This is an adapted version of ISEAS Perspective 2025/26 published on 2 April 2025. The paper and its references can be accessed at this link.