VINACHEM

The U.S. has imposed a 20% tariff on Vietnamese exports - higher than other ASEAN peers. Is this a warning or an incentive for Vietnam to elevate its role in global trade?

When the White House announced a retaliatory tariff adjustment on August 1 for 69 countries, major Vietnamese exporters in Hanoi immediately felt a shift in the winds from the U.S. market.

The new tariff on Vietnamese exports to the United States is 20% - 1 percentage point higher than other ASEAN nations but still lower than many global competitors. The question is whether this move serves as a warning, a penalty, or a motivation for Vietnam to ascend the global value chain.

Comparing within ASEAN

The U.S. has set a 20% retaliatory tariff on Vietnamese exports - compared to 19% for Thailand, Indonesia, the Philippines, and Cambodia. While the 1% difference seems minor, it carries symbolic geopolitical weight. Vietnam is now the U.S.'s third-largest goods trading partner, after China and Mexico.

In 2024, Vietnam exported $136 billion to the U.S. and imported $13 billion, resulting in a trade surplus of over 10.5 times. In contrast, Thailand had a surplus 3.5 times its imports, Indonesia 2.8, the Philippines 1.6, and Cambodia - despite a surplus 43 times - has only one-tenth of Vietnam’s trade volume.

The 20% tariff should be seen as a “soft adjustment,” not a punishment, but neither an incentive. It's a message: Vietnam is a rising partner, but it must now contribute more toward balancing trade. That means improving domestic value, investing in supporting industries, and evolving beyond a low-cost manufacturing hub.

Globally, the rate positions Vietnam in the middle: higher than ASEAN peers, but lower than others like China (50%), India (25%), and Canada (35%). Mexico, with a USMCA agreement, is exempt.

Will Vietnam become a consumer market for the U.S.?

On the flip side, Vietnam offers 0% tariffs on U.S. goods. Could that flood the local market with American products?

Not likely, according to experts. The U.S. industrial structure doesn’t align well with Vietnam’s consumer demand. For example, large-engine SUVs promoted by former President Trump may slowly gain popularity but aren’t expected to dominate.

In agriculture, Vietnam committed to importing $2 billion in U.S. goods annually, including corn, soybeans, and livestock feed. Yet, most major companies like Cargill already have local factories, minimizing direct imports. Medical products and pharmaceuticals are typically manufactured in Costa Rica, Uruguay, or Taiwan - not in the U.S.

In essence, even with full market access, American products won’t flood Vietnam. Instead, the two nations have complementary interests: Vietnam seeks U.S. technology, while the U.S. wants market access.

The road ahead

Diplomats highlight the ongoing Vietnam-U.S. trade negotiations as an example of diplomatic agility. Since late April 2025, both sides have engaged in intensive discussions, eventually reducing the initial proposed tariff from 46% to 20% - not just a cut, but a relief of pressure.

Vietnam is emerging as a new star in the global supply chain, with GDP growth steady at 6–7%, digital and industrial infrastructure accelerating, and a young, robust consumer base.

Still, the decisive factor lies in Vietnam’s internal strength. The 20% tariff is a test. To pass, Vietnam must boost its manufacturing capabilities, increase localization, invest in R&D, and build strong Vietnamese brands. Institutional reform, transparency, and high-quality FDI are also essential for sustainable development.

Challenges remain. According to the Asian Development Bank (ADB), the July 2025 trade agreement with the U.S. - with significantly higher import tariffs - will likely reduce export demand for the remainder of 2025 and into 2026. Additionally, Vietnam’s Purchasing Managers’ Index (PMI) has shown signs of industrial slowdown since late 2024.

As a result, ADB has revised Vietnam’s GDP growth forecasts down to 6.3% in 2025 and 6.0% in 2026.  – Source: VNN