Vietnam’s 46 Per Cent Tariff Shock: A Catalyst for Economic Reform?

On April 9, US President Donald Trump announced a 90-day pause on the implementation of the “reciprocal” tariff system, which would subject Vietnam and about 75 other countries to tariffs exceeding 10 per cent. On the same day in Washington, Vietnamese Deputy Prime Minister Ho Duc Phuoc met with US Trade Representative Jamieson Greer, and the two sides agreed to launch negotiations on a bilateral trade agreement to reduce non-tariff barriers (NTBs) and promote economic relations. While this development gives Vietnam some time, it does not ease concerns about the potential imposition of a 46 per cent tariff after the 90-day period.

This figure shocked Vietnamese exporters, but the move was not a short-term protectionist impulse. Rather, it was part of a broader strategy — championed by Trump — to reshape the rules of international commerce through reciprocity and retaliation against NTBs that limit US access to foreign markets.

For Vietnam, the message is clear: it’s not just about how much it sells to the US but also how open it is to buying from the US. Vietnam’s system of NTBs has come under scrutiny — drawing strong criticism from President Trump’s economic advisor, Dr Peter Navarro. Dr Navarro criticised Vietnam for being a transhipment point for Chinese products exported to the US. However, this is not the most challenging issue in the bilateral trade between the US and Vietnam.

At the heart of the Trump tariff framework is the idea of reciprocal access — if the US offers low barriers to your goods, it expects the same in return. Traditional tariffs are no longer the main obstacle. Increasingly, non-tariff measures — such as import licensing rules, technical standards, and sanitary restrictions — have become the real barriers to trade.

According to the World Bank’s WITS database, approximately 38 per cent of Vietnam’s import value is subject to at least one non-tariff measure, and nearly 47 per cent of import categories are affected. These NTBs are dense in agriculture, food, pharmaceuticals, electronics, and industrial inputs, often taking the form of licensing requirements, inspections, or inconsistent standards. While intended to meet public policy goals, their application can be opaque, making them function as hidden trade barriers.

Vietnam has a history of embracing reform under pressure: World Trade Organization accession in 2007, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the EU-Vietnam Free Trade Agreement required substantial overhauls. This moment is no different. Reforms could include simplifying import licensing, aligning technical standards with international norms, streamlining customs clearance, and reviewing Sanitary and Phytosanitary measures and Technical Barriers to Trade regulations. These steps would address US concerns while improving Vietnam’s business climate and attracting higher-quality investment.

Just as in 1986, this new wave of reform requires bold thinking and the will to break from entrenched interests.

Vietnam’s export-led growth model has been effective, but its sustainability depends on openness in selling and buying. Removing NTBs can help domestic producers access better inputs, adopt advanced technologies, and integrate more deeply into global value chains. On the geopolitical level, being seen as a transparent, open market strengthens Vietnam’s position — not just with the US but also with partners like the European Union, Japan, and Australia. NTBs are often used to protect domestic industries, but in many cases, they hinder rather than support their development. The government must make careful decisions about which NTBs to retain and which to eliminate to balance internal priorities and external demands.

The Trump tariffs are not just an economic penalty — they are a strategic message. The world’s largest economy is demanding fairness, not only in nominal tariffs but in the rules behind the scenes. Vietnam has the experience to respond constructively.

If it chooses to reform now and manages to persuade the US to reduce the tariff from 46 per cent to a less punishing level, its trade pressures would be relieved, and its economy can move towards greater openness, resilience, and long-term prosperity.

Improving the trade regime aligns with General Secretary To Lam’s call for “removing institutional bottlenecks“. NTBs are among the key obstacles preventing Vietnam from opening up more comprehensively.

NTBs are usually part of free trade agreements (FTAs). FTA negotiation takes years, but “significant steps to remedy non-reciprocal trade arrangements and align sufficiently with the US on economic and national security matters” could lead to tariff reductions, as articulated in Section 4(c) of Trump’s 2 April executive order, “Regulating Imports with a Reciprocal Tariff”.

The removal of ngan song cam cho (inter-provincial trade restrictions) in 1986 was one of the most notable successes of Vietnam’s Doi Moi (renovation) reforms. When administrative barriers were dismantled, domestic markets revived rapidly. Commodity production flourished, the private sector grew, prices stabilised, and the economy laid the groundwork for long-term development.

Despite the growing backlash against global integration, we live in an interconnected world — no country can exist in isolation. In today’s world, Vietnam faces a similar challenge: the need to eliminate NTBs like complex regulations and licensing requirements that hinder foreign goods and fuel trade friction. Just as in 1986, this new wave of reform requires bold thinking and the will to break from entrenched interests. If successful, Vietnam would not only meet the expectations of major partners like the US but also potentially spark fresh momentum for growth and institutional modernisation.

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