Navigating Tariffs: Vietnam’s Resilience in the Global Market

Author: Chau Anh
Date: Fri, August 8, 2025 | 12:24 PM GMT+7

Vietnam’s manufacturing and export sectors are currently under the spotlight as they navigate the implications of U.S. tariffs. The latest executive order, signed by President Donald Trump on July 31, has introduced reciprocal tariffs affecting 69 countries, including Vietnam, which will now face a 20% levy on its goods. While this represents a significant consideration for Vietnamese exporters, experts at Vietcombank Securities (VCBS) suggest that Vietnam’s competitive edge remains intact, particularly when compared to its regional peers.

Tariff Comparisons

Under this new mandate, Vietnam’s tariff rate, though higher than that of some regional neighbors such as Cambodia, Indonesia, Malaysia, the Philippines, and Thailand (all at 19%), is significantly lower than that of countries like Laos and Myanmar, both facing levies of 40%. This differential positions Vietnam favorably within the Southeast Asian manufacturing landscape, suggesting that manufacturing costs might not be as adversely affected as previously anticipated.

Competitive Advantages

VCBS experts emphasize Vietnam’s robust competitive advantages. The nation’s coastal geography provides access to critical shipping lanes, enabling efficient logistics and transport. Additionally, the country benefits from relatively low industrial land rents and electricity prices, which enhance its appeal for manufacturing operations. Moreover, labor costs in Vietnam remain competitive when compared to other countries in the region, bulking up its attractiveness to foreign direct investment (FDI).

Political stability and favorable investment incentives further fortify Vietnam’s position. The nation has cultivated a wide network of free trade agreements, which serves to enhance its attractiveness as a manufacturing hub in global supply chains. Given these factors, VCBS rates Vietnam as an increasingly attractive destination for both FDI and manufacturing activities.

Understanding Transshipment Risks

However, the potential for goods to be transshipped through Vietnam to avoid tariffs is a matter of significant concern. The executive order includes provisions for imposing an additional 40% duty on items identified as having been transshipped to escape applicable tariffs. This aspect could pose challenges for exporters in Vietnam, as it heightens scrutiny on the provenance of goods entering the U.S. market.

According to VCBS, the U.S. has not yet clarified its standards regarding transshipment, though it typically employs a domestic value-added threshold of around 35%. Each industry faces varying risks based on its localization rates. For instance, the agriculture sector boasts a localization rate of about 65% and is largely insulated from tariff risks. In contrast, electronics manufacturing, particularly computers and phones, remain exempt from these tariffs, providing some relief to a critical segment of the economy.

Sectoral Insights: Localization Rates

Several sectors, such as machinery and equipment, have lower localization rates, which could expose them to greater risks from reciprocal tariffs. With machinery and equipment hovering around a 30% localization rate, VCBS analysts caution that these industries could see significant pressure if localization thresholds are raised.

Mid-range localization rates also warrant attention. Industries including transport (43%), metals (41%), and textiles (45%) may find themselves under scrutiny, potentially facing tighter regulatory measures. While short-term impacts could be felt if localization thresholds are elevated, in the long run, the pressure to meet these standards could drive innovation and encourage manufacturers to shift towards higher value-added production methods within Vietnam.

The Road Ahead for Vietnam-US Trade Relations

As the diplomatic conversations between Vietnam and the U.S. progress, the nuances of the ongoing negotiations could yield favorable outcomes. The Vietnamese government has been proactive, forming a negotiation delegation led by the Minister of Industry and Trade, which has resulted in significant dialogues around tariffs, customs, and trade cooperation.

Despite the current tariff challenges, recent statistics reveal a resilient trend for Vietnam’s FDI climate. Registered FDI capital reached $24.09 billion in the initial months of 2025, reflecting a 27.3% year-on-year increase. The processing and manufacturing sector accounted for the lion’s share of this influx, indicating that investor confidence remains robust.

The Future Landscape of Investment

With a backdrop of ongoing global trade tension, Vietnam’s economic framework has demonstrated resilience. The nation is well-positioned to solidify its standing as a preferred destination for investment and business operations, further embedding its role in the intricacies of international supply chains.

As negotiations with the U.S. continue, it remains vital for domestic firms to increase value addition and enhance transparency within their supply chains. As industry maturation progresses, Vietnam might very well emerge with an even stronger foothold in the global market, shaped by diplomatic agility and an adaptable economic strategy.

The evolving landscape of tariffs and trade presents both challenges and opportunities for Vietnam. As it faces these developments head-on, the nation is set on a path that promises growth and stability, all while reinforcing its strategic presence on the global trading stage.