The next few years will be a make-or-break economic turning point for Vietnam. Plus, it has been successful overall in attracting around $18.5 billion of net foreign direct investment, according to World Bank data since 1970. The plunge of investment comes as the U.S.-China trade war escalates. This conflict has led to increased scrutiny of Vietnam’s trade practices and higher tariff rates.
Trade data compiled following 2018 depicts the largest ever monthly trade surplus by Vietnam with the United States. This sudden boom has led to some raised eyebrows about what exactly is driving Vietnam’s exports. Cullen Hendrix, a non-resident senior fellow at the Peterson Institute for International Economics, called it “just one more episode in the global game of whack-a-mole.” He meant the subsidies and other creative strategies countries use to avoid or mitigate international tariffs.
As of 2024, Vietnam’s trade surplus with the United States has skyrocketed to over $123.5 billion. That’s a dramatic jump from only $39.5 billion in 2018, as reported by the Census Bureau. The rapid growth has made Vietnam an attractive option for U.S. firms. They are itching to see the end of those increased tariffs on Chinese imports. A portion of Vietnam’s booming exports might just be Chinese goods. By evading tariffs through diversion, these products did not have to pay the appropriate duties.
Edmund Malesky, a political science professor at Duke University, shared his expertise on the rapidly changing Vietnamese manufacturing landscape. He calculates that value-added production accounts for 84% of Vietnam’s surge in manufacturing growth. The rest (16%) is from rerouting trips. Rerouting has alarmed U.S. officials, since it involves the circumvention of tariffs the U.S. imposes on Vietnam’s exports.
On April 9, President Donald Trump slapped a punitive 46% “reciprocal” tariff on all goods entering the United States from Vietnam. This decision marked a short but important step toward positive trade policy. Barely in the same day, he changed the tariff rate on Vietnam, at least to start, to a more palatable 10% tariff on all products from that country. Such rapid swings highlight the instability of exchange relationships and the possible ramifications on economies.
Tuan Chu, an associate program manager at RMIT University Vietnam, stressed the tough spot that Vietnam currently occupies in this emerging trade landscape. He stated, “Vietnam is highly vulnerable,” indicating that while the country has benefited from increased investment and exports, it remains susceptible to shifts in U.S. trade policy.
Vietnam is successfully and strategically steering through the choppy waters of international trade and investment. If it wants to sustain economic growth moving forward, it needs to cut rerouting and tariff evasion concerns at the pass. Our nation’s strategic positioning should keep presenting us opportunities, as long as the global economy remains rocky.