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AllAfrica
3 days ago
- Business
- AllAfrica
Vietnam's FDI firms caught in Trump's transshipment crossfire
The US tariff rate officially announced on Vietnam on July 31, 2025, has deepened anxiety among foreign direct-invested (FDI) enterprises regarding penalties for transshipment. Vietnamese exports to the US, as of August 7, are subjected to a 20% tariff, while goods deemed as 'transshipped' will face a 40% tariff. However, no clear criteria for what qualifies as transshipment have been announced by the US. The US Harmonized Tariff Schedule (HTSUS) states that if US Customs determines a product shows signs of being 'transshipped to evade duties,' it will face the additional 40% tariff. While there is a grace period—goods clearing customs before October 5, 2025, will not be subject to the new rates—the lack of clear criteria for enforcement is paralyzing long-term decision-making. Faced with rising costs and declining revenues, some FDI enterprises have already begun scaling down production or gradually shifting their supply chains out of the country. These developments have exposed a core structural weakness in Vietnam's economy, namely its vulnerability to fluctuations in global trade policy. This is because Vietnam's export-driven economy depends on FDI for over 70% of its total export value. Moreover, the manufacturing sector is heavily reliant on imported raw materials, with around 80% coming from China. Meanwhile, the proportion of goods that meet true localization standards—produced entirely by Vietnamese-owned businesses with domestic technology—remains low at just 5–10% of total export value. If 'transshipped' goods are interpreted strictly to mean any product not fully controlled by a Vietnamese production process, then nearly all goods exported from Vietnam could be classified as transshipment and face the devastating 40% tariff. At a time when Vietnam is striving to upgrade its position in the global value chain, this ambiguity could become a significant barrier to attracting high-quality FDI. For now, the situation remains fluid. Vietnam may continue negotiations to lower the tariff rates, with General Secretary To Lam expected to visit Washington. Washington may also reopen talks with other countries, with President Donald Trump quoted by NBC News as saying, 'The US is ready to keep the door open for attractive offers.' The new US tariff policy has already triggered significant cost restructuring among FDI enterprises in Vietnam. According to a June 2025 survey by PwC, 86% of businesses in Vietnam expressed concern about the tariffs' impact and a striking 44% of FDI companies have already begun relocating factories or dispersing production to other countries. Cargill, a major US corporation with over 25 years in Vietnam, has already closed several plants and exited the aquaculture sector. Similarly, Intel has postponed a planned US$1 billion investment to expand its chip production and has initiated global layoffs that include its Vietnamese staff. This has created a 'domino effect,' with other tech giants like Samsung and LG also cutting their workforces and scaling back production in Vietnam. From an economic perspective, tariffs inevitably lead to 'cost-push' inflation, as businesses pass the additional costs onto the final product. As Dr Phung Giang told BBC Vietnamese, this could make Vietnamese goods significantly less competitive in the American market, which currently accounts for 30% of Vietnam's total export revenue. The textile and garment industry, which accounts for 35–40% of that export value, illustrates the problem. According to Hoang Manh Cam, deputy chief of the Office of the Vietnam National Textile and Garment Group (Vinatex), a mere 1% price increase can lead to a 1–2% drop in demand. This is compounded by other costs. Le Hang, the deputy secretary-general of the Vietnam Association of Seafood Exporters and Producers (VASEP), notes that exporters face multiple surcharges that can total up to 75% of a shipment's value. On top of that, logistics costs have skyrocketed, with the price of shipping a container to the US nearly doubling in recent months from $1,850 to between $2,950-$3,500. As export-oriented businesses face mounting external costs, inflation is spreading across Vietnam's domestic economy. In the first half of the year, the State Bank of Vietnam (SBV) injected an additional 2.5 quadrillion dong ($95.3 billion) into the economy, causing the Vietnamese currency to depreciate to a record low against the US dollar, while consumer inflation has risen by 3.57%. While the SBV's monetary policy director, Pham Chi Quang, stated this is a deliberate policy to support businesses, other experts disagree. Dr Le Thi Thu Trang of the Friedrich Naumann Foundation argues this is placing dual cost pressures on exporters—higher prices for imported materials and increased domestic operating expenses. Dr Le Hai Ha from the University of Commerce concurs. He says that the core issue remains Vietnam's underdeveloped domestic industries and high rate of localization, which forces companies to rely on expensive imported materials. In addition to rising costs, FDI enterprises now face declining revenues as international orders evaporate. According to the International Trade Centre (ITC), escalating trade tensions have triggered mass order cancellations across global supply chains—a trend that hit Vietnam immediately after the new US tariff policy was announced. In the first half of April, Ha Chi Minh City's customs department reported that 50% of export orders to the US were abruptly canceled. In Binh Duong Province (now part of Ho Chi Minh City), over $700 million worth of export declarations were canceled in just four days. This wave of cancellations has sent a shock through the broader economy. Vietnam's Purchasing Managers' Index (PMI) recently dropped to 48.9%, its third consecutive monthly decline. According to S&P Global, surveyed exporters overwhelmingly cited the new US tariff policy as the primary cause for the sharp drop in new orders. Key sectors like textiles, footwear and electronics have been hit particularly hard. Domestic suppliers are also feeling the pain. 'As soon as the US announced tariffs on Vietnam, one of our clients suspended an order worth several million US dollars,' said Nguyen Van Ca of Phuc Can Industrial Co, Ltd. Leaders in the textile and wood-processing industries report similar challenges, with stable, year-long contracts being replaced by precarious short-term agreements, typically for only three months. Ultimately, this disruption is delivering a direct shock to Vietnam's labor market. A recent report from the Vietnam Chamber of Commerce and Industry (VCCI) found that more than 637,000 workers have already been affected by these order reductions, with over 53,000 having lost their jobs. Projections from the State Organization and Labor Science Institute suggest this trend will continue, with another 285,000 workers potentially at risk. For years, Vietnam was a primary beneficiary of the US-China trade war, successfully positioning itself as a 'China + 1' destination for investors looking to safeguard their supply chains. The country's low labor costs, geopolitically strategic location and generous incentives made it a top alternative, fueling a wave of foreign investment that peaked as early as 1996, just a decade after the Doi Moi reforms began. But the new US tariff policy is turning that strength into weakness. The tide is turning because, for nearly 40 years, the government has prioritized attracting FDI over developing domestic production capacity. This created a cycle of dependency, leaving the economy highly vulnerable to global economic disruptions. Analysts from Singapore's UOB Bank note that this vulnerability stems from Vietnam's open economy, where exports account for a staggering 83% of GDP—the second-highest ratio in ASEAN, behind only Singapore (182%). The consequences of this vulnerability are already being priced in. Amid the ongoing tariff 'storm,' the International Monetary Fund (IMF) projects that Vietnam's GDP growth could fall to 5.2%, while Moody's Analytics has revised its 2025 forecast downward from 6.5% to 5.5%, citing the direct impact of the US policy. With these mounting challenges exposing the structural weaknesses of Vietnam's economy, the question now is: what policies will Vietnamese policymakers adopt to provide timely support, retain foreign investors and build a more sustainable and resilient future? This article was published in English by The Vietnamese and originally published in Vietnamese by Luat Khoa Magazine. An edited version is republished here with kind permission.
Business Journals
09-06-2025
- Business
- Business Journals
New Vietnamese bank to launch in Houston
USV Bancorp is in the final stages of raising capital to support its acquisition of a rural Texas bank to launch the first-ever Vietnamese-owned bank in Houston and second nationwide.
South China Morning Post
29-01-2025
- Science
- South China Morning Post
Stripped for parts: Vietnamese poachers target last of Malaysia's wild tigers
Published: 2:50pm, 29 Jan 2025 Updated: 2:52pm, 29 Jan 2025 Commercial fishing fleets have been playing a key role in trafficking parts of tigers poached in Malaysia , according to research released on Wednesday. The fishing boats are part of a network of routes used by teams of poachers to move parts of illegally killed Malayan Tigers and other poached animals to Vietnam , according to the study by conservation organisations Panthera and ZSL in conjunction with Malaysia's Sunway University. Through interviews with more than four dozen people involved in the operations, including poachers and those who brokered sales of the illicit goods, researchers found that fishing boats were able to carry larger consignments, cheaper and less likely to be checked by customs than land or air routes. Vietnamese-owned fishing vessels that are registered to a Malaysian company are seen docked at a Malaysian port in this undated handout photograph. Photo: Panthera/Sunway University via AP 'To really crack a problem and insert the right intervention that's going to have any impact you have to understand the thing inside out,' said Panthera's Rob Pickles, the lead author of the study, in a phone interview from Kuala Lumpur. 'That's what we hope that this study does – contribute to that depth of understanding of the problem to allow us to tailor the interventions.' From a population estimated at some 3,000 tigers in the middle of the 20th century, the latest estimates are that there are only about 150 of the cats left in Malaysia and they have already gone extinct in Cambodia , Laos and Vietnam over the last 25 years. In addition to poaching, tigers have lost much of their habitat to deforestation, and they have been falling victim in recent years to the canine distemper virus while a major source of food, the wild boar, has been decimated by the African swine fever virus. 'It's their last gasp,' Pickles said. 'This is the last chance to turn things around.'
