Vietnam prepares for impact of 20% tariff as investors back deal
'The global economy is being impacted by geopolitical competition, climate change, digital transformation, and especially tariff policies from major markets such as the United States,' Deputy Trade Minister Phan Thi Thang said at an investment summit in Hanoi on Wednesday (Jul 9). 'However, Vietnam still has many opportunities to break through.'
Vietnam, an export powerhouse that last year had the world's third-biggest trade surplus with the US, is trying to navigate Washington's demands while keeping good relations with Beijing, its biggest trading partner. The US has said a tentative deal has been reached, setting a 20 per cent levy on Vietnamese goods and 40 per cent on transshipments, which is mainly aimed at China.
'Electronic components, automobiles and textiles are facing tariffs from the US,' Thang said. 'But this is an opportunity to increase added value and to shift to high-tech products.'
Vietnam's negotiators are still working to finalise the details of the trade deal announced by US President Donald Trump last week. The 20 per cent tariff was a significant reduction from the previously threatened 46 per cent rate and puts it ahead of regional rivals such as Thailand, Malaysia and Indonesia, who were sent letters on Monday setting out tariffs from 25 per cent upwards.
While Vietnam currently holds a first-mover advantage in Asia, it's possible that neighbours will end up with lower levies. And it's unclear how the terms of the 40 per cent transhipment tariff will be enacted and enforced.
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Still, investors in the nation's stock market see the 20 per cent tariff as 'good news', according to Thu Nguyen, deputy CEO of VinaCapital Fund Management, who expects to see more technology companies listing in Vietnam. Vietnam's stocks have rallied to a three-year high as trade tensions shifted to other Asian nations facing higher tariffs.
Vietnam saw growth accelerate in the second quarter as foreign buyers raced to get ahead of higher Trump levies, but the uncertainty in global markets has put the central bank on standby to take steps to curb inflation and support growth.
The nation is keeping its target of at least 8 per cent GDP growth this year, and will continue to strive for economic expansion of 10 per cent or above in 2026 to 2030, Deputy Prime Minister Ho Duc Phoc said at the same investment summit on Wednesday.
One of the biggest sticking points throughout negotiations was Vietnam's trade relationship with China. The US demanded more action from Hanoi to prevent Chinese goods from being rerouted and repackaged through Vietnam to skirt higher tariffs. Beijing said it was examining the trade deal and would retaliate if its interests were hurt. BLOOMBERG
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