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The potential increase in tariff rates on U.S. imports poses a significant risk to the economic prospects of nations like Vietnam.
In recent years, Vietnam has seen a surge in foreign direct investment as global companies seek alternatives to mitigate risks associated with manufacturing in China. According to World Bank data dating back to 1970, Vietnam has attracted around $18.5 billion in net foreign direct investment.
In a notable move, President Donald Trump implemented a temporary “reciprocal” tariff rate of 46% on U.S. imports from Vietnam on April 9, only to adjust it the same day to a rate of 10%. Countries facing these heightened tariff measures must negotiate within a 90-day window for more favorable trade terms with the U.S. government.
“Vietnam is highly vulnerable,” commented Tuan Chu, an associate program manager at RMIT University Vietnam.
The potential for increased tariffs on imports from Vietnam is partly attributed to the nation’s trade surplus with the U.S. Cullen Hendrix, a senior fellow at the Peterson Institute for International Economics, highlights that Vietnam’s trade surplus reached approximately $123.5 billion in 2024 and was around $39.5 billion in 2018, according to Census Bureau statistics.
Some of Vietnam’s increasing exports to the U.S. may actually consist of Chinese goods that have been rerouted to avoid higher tariffs, as suggested by a research paper from Harvard Business School. Following the escalation of the U.S.-China trade conflict in 2018, trade data indicated this trend.
Edmund Malesky, a political science professor at Duke University and one of the study’s authors, asserts that while 84% of Vietnam’s manufacturing growth can be classified as value-added production, a smaller portion—approximately 16%—reflects rerouting, which has raised concerns in the United States.
Should the proposed higher tariffs on U.S. imports be enacted, companies may need to revise their international supply chains significantly.
“This is part of a larger game of global whack-a-mole,” Hendrix noted, emphasizing the complexities of current trade dynamics.
Watch the video to learn how China may use countries such as Vietnam as a side door to trade with the U.S.
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