In 2025, U.S. policy under the Trump administration pivoted to a novel form of “reciprocal” tariffs targeting Vietnam. Initially set to impose a 46 percent levy on Vietnamese exports, a truce was reached: Vietnamese goods now face a 20 percent tariff, with a punitive 40 percent rate on suspected transshipments ,The deal also requires Vietnam to open its market to U.S. exports tariff‑free and commit to combating origin fraud . For Vietnam’s manufacturing sector—engineered around global supply chains and heavily reliant on cost‑competitive exports—the consequences are profound.
1. Export Performance and Industrial Vulnerability
Vietnam is exceptionally dependent on the U.S. market, with exports comprising 87% of GDP and U.S. trade totaling roughly $137 billion in 2024 . Key sectors—electronics, machinery, garments, footwear, furniture—stand to absorb the greatest shock. A government estimate warns that U.S. export revenue could fall by nearly one‑third, potentially shrinking it by $37 billion . Meanwhile, exports of electronic goods enjoy hundreds of billions in output, now undermined by higher costs
Clearly, the Vietnamese economy is vulnerable to U.S. policy shifts, especially since the current 20 percent tariff is double the 10 percent baseline and far above the 3.3 percent average prior to April . The risk of sustained tariffs could redirect multinational investment toward competitive neighbors like Thailand or Malaysia, potentially slowing Vietnam’s manufacturing expansion .
2. Transshipment and the “Made in Vietnam” Debate
A central concern in Washington is that Vietnamese assembly lines are often fronting for Chinese production, enabling tariff circumvention via “transshipment.” The U.S. responded with a hefty 40 percent tariff on goods flagged this way . Enforcement of “rules of origin” is complex—determining whether a minor final assembly in Vietnam constitutes substantial transformation remains debated .
If customs enforcement tightens, many Vietnamese factories reliant on Chinese components could be caught in regulatory limbo, inhibiting growth. This dynamic signals both a challenge—and an opportunity—for Vietnam to strengthen domestic value‑added manufacturing and diversify component sourcing.
3. Strategic Policy Responses and Resilience
Vietnamese leadership has responded proactively. Raids on counterfeit operations, binding commitments to U.S. imports, and greater regulatory alignment illustrate Vietnam's willingness to placate Washington and stabilize access . Additionally, Vietnam continues to pursue broad trade liberalization through agreements like CPTPP and EU–Vietnam FTA, positioning itself within alternative markets should U.S. trade become riskier .
Domestically, Vietnam can also seize this juncture to accelerate structural reform—encouraging foreign investment, reducing state-enterprise dominance, and moving into higher-value manufacturing .
4. Energy Costs and Manufacturing Competitiveness
One often-overlooked factor is energy. With power demand doubling since 2014 and coal-reliant production dominating manufacturing-heavy outputs (cables, motorbikes, plastics), energy cost is a significant lever in cost competitiveness Reuters. Any tariff‑induced rise in production costs will compound Vietnam's struggles unless it continues expanding cost‑effective renewables and energy reform.
5. The Global Context: Protectionism, Deglobalization, and Diversification
Vietnam is not alone. Emerging trade walls reflect broader global trends: rising protectionism and deglobalization . Similar Southeast Asian nations face analogous tariff pressures under the U.S.’s new asymmetric “bilateral adjusted deficit” framework
Yet this is also a time of opportunity. As companies reconsider China‑centric supply chains, Vietnam remains a key alternative—provided it can offer stability, quality, and sufficient domestic content to avoid transshipment penalties.
6. Looking Ahead: Prospects and Policy Path
- Short term, Vietnam must navigate diplomatic negotiations ahead of Trump’s August 1 deadline, pressing for further tariff reductions, stable relations, and clear origin rules
- Mid term, manufacturers should invest in sourcing diversification and deeper local value chains to reduce exposure to Chinese content.
- Long term, Vietnam needs to double down on economic reform—enhancing industrial capacity, energy mix, and integration into global value networks beyond the U.S., such as EU and CPTPP members.
If these steps succeed, Vietnam’s manufacturing sector can transform adversity into structural advantage, emerging stronger, more resilient, and diversified.
In Summary
U.S. tariffs on Vietnam signal a turning point—Vietnam must address short-term shocks while reducing long-term vulnerability. By strengthening regulatory frameworks, diversifying supply, and accelerating reform, Vietnam can transition from being a tariff-exposed assembly hub to a resilient, sophisticated manufacturing powerhouse. Its success now depends on balancing global uncertainties with strategic domestic action.