In a move that has shocked international trade circles, President Donald Trump has announced a decision to impose a 46% retaliatory tariff on Vietnam. This action is part of his “America First” strategy, which aims to reduce the U.S. trade deficit and protect domestic manufacturing. This article analyzes the effects of President Trump’s 46% retaliatory tariff on Vietnam.
Details of the Tariff Decision
U.S.-Vietnam trade relations have advanced significantly since normalization in 1995. However, an increasingly lopsided trade balance and allegations that Chinese goods are being “re‑branded” as Vietnamese have strained this relationship.
Products Subject to the Tariff
According to the White House announcement, the 46% tariff will apply to the bulk of Vietnam’s exports to the U.S., focusing on:
- Textiles and Footwear (approximately 35% of Vietnam’s total exports to the U.S.)
- Furniture and Wood Products (around 8%)
- Electronics and Components (about 25%)
- Seafood (circa 7%)
Implementation Timeline
The tariff will be phased in over three stages:
- Phase 1 (May 2025): 20% tariff on textiles and footwear
- Phase 2 (July 2025): Rate raised to 30% and expanded to electronics and furniture
- Phase 3 (October 2025): Full 46% tariff across all listed categories
Trump’s Justifications
In his White House address, President Trump cited:
- A U.S. trade deficit with Vietnam of $118 billion in 2023
- Allegations that Vietnam is acting as a “backdoor” for Chinese products to evade U.S. duties
- The need to protect American jobs
- Incentivizing U.S. companies to repatriate manufacturing
Comparison with Tariffs on Other Countries
A 46% tariff on Vietnam matches the level imposed on China and far exceeds the 10-25% rates applied to Canada and Mexico, placing Vietnam in a “high‑monitoring” category alongside China.
Underlying Causes of the Decision
U.S.-Vietnam Trade Deficit
The bilateral deficit surged from $25 billion in 2015 to $118 billion in 2023. Though only one‑fifth of the deficit is with China, it remains one of America’s largest deficits with any trading partner.
“America First” Economic Policy
Central to Trump’s economic agenda, “America First” aims to:
- Prioritize U.S. economic interests
- Reduce trade deficits
- Re-industrialize the U.S. economy
- Safeguard American employment
Pressure from U.S. Manufacturing Sectors
U.S. trade associations such as the National Council of Textile Organizations (NCTO) and the National Association of Manufacturers (NAM) have lobbied intensely, accusing Vietnam of dumping and unfair export subsidies.
Link to China Trade Strategy
Following tariffs on China, many manufacturers relocated production to Vietnam. Trump branded this as a “tariff‑dodging” tactic, accusing Vietnam of becoming “China‑Lite.”
Impact on Vietnam’s Economy
GDP and Growth
World Bank estimates suggest a 46% tariff could shave 0.8-1.2% off Vietnam’s GDP in 2025-2026. Exports to the U.S. account for about 25% of Vietnam’s total exports, roughly 20% of the national GDP.
Hardest‑Hit Sectors
- Textiles & Footwear: Approximately 2.5 million workers employed
- Electronics: Multinationals such as Samsung and Intel face order and revenue declines
Exchange Rate and Inflation
Pressure on the VND/USD exchange rate is likely to come from:
- Decreased foreign‑exchange earnings
- Potential drop in FDI
- Reduced reserves, prompting State Bank intervention and upward inflationary pressure
Employment and Income
An estimated 400,000-500,000 jobs may be directly affected in the short term, mostly in export‑oriented industries. Average incomes in these sectors could fall by 10-15% due to reduced orders and hours.
Effects on Exporters
Major exporters – Vinatex, TNG, Việt Tiến (textiles); Trường Thành, Scansia Pacific (furniture); Samsung, Intel (electronics) – will face:
- Fewer U.S. orders
- Higher costs to maintain market share
- Stiffer competition from Bangladesh and Indonesia
Global brands Nike and Adidas, which source heavily from Vietnam, have voiced concern and are reevaluating procurement strategies.
Rising Costs and Competitiveness
To absorb tariffs, Vietnamese firms must:
- Lower sales prices
- Cut production costs
- Invest in productivity‑boosting technology
With profit margins often only 5-8%, many firms will struggle to shoulder the extra duty.
Supply‑Chain Disruption
Vietnam’s role in global supply chains will be disrupted. Corporations like Apple are exploring diversification into India, Indonesia, and Malaysia.
Vietnamese Government Response
The Ministry of Foreign Affairs stated “deep concern,” emphasizing the inconsistency of the tariffs with the Comprehensive Partnership. Actions include:
- Establishing an interagency special task force
- Urgent trade negotiations with the U.S.
- Support measures for exporters
- Possible WTO dispute if no agreement is reached
The Ministry of Industry and Trade is also boosting programs to help firms access new markets and diversify products.
Impact on Vietnamese in the U.S.
Higher Prices for Vietnamese Goods
Communities often import:
- Vietnamese groceries (rice, spices, dried goods, canned foods)
- Handicrafts
- Traditional textiles
A 46% tariff will significantly raise prices, reducing the accessibility of home‑country products.
Effects on Vietnamese‑Owned Businesses
Asian grocery stores, Vietnamese restaurants, and import/distribution firms will face:
- Higher input costs
- Lower profit margins
- Forced price increases, undermining competitiveness
- Potential closures in worst‑case scenarios
Employment in Trade‑Related Fields
Import‑export firms, logistics providers, and retail outlets could cut staff or hours as trade volume contracts.
Remittances
A weakened VND may erode the real value of remittances, pressuring overseas Vietnamese to send more to maintain relatives’ living standards.
Transnational Family Business
Cross‑border ventures – family investments, co‑operations, imports – will be strained by higher duties, affecting incomes and kinship ties.
Potential Upside Opportunities
- U.S. Production Incentives: Some Vietnamese‑American entrepreneurs may shift to domestic manufacturing
- Supply Diversification: Seeking suppliers in low‑tariff countries
- Brokerage Roles: Acting as intermediaries to help Vietnamese firms find third‑country routes for legally mitigating duties
Community Standing
Vietnamese‑American advocacy efforts may intensify against high tariffs. Depending on both governments’ actions and trade tensions, the community’s social standing in the U.S. could be impacted.
See also: Will President Donald Trump abolish the Internal Revenue Service (IRS) and federal income tax?
Outlook for U.S.-Vietnam Trade Relations
In the short term, bilateral trade will face turbulence. Nonetheless, experts believe a compromise is possible because:
- Vietnam is a strategic U.S. partner in Asia
- The U.S. values Vietnam in its China strategy
- Major American investors (Apple, Intel) operate in Vietnam
- Both nations benefit from stable trade
The WTO and other international bodies may mediate. Vietnam has the right to lodge a WTO complaint if the 46% tariff is deemed unfair or violative of trade rules.
Conclusion
President Trump’s 46% retaliatory tariff poses a significant challenge to Vietnam’s economy, especially its key export sectors. Yet, it also pressures Vietnamese firms to diversify markets, enhance competitiveness, and deepen integration into global value chains. The Vietnamese government must negotiate for a fair deal and support businesses through this difficult period. At the same time, enterprises should pursue market diversification and value‑added strategies to survive in the new landscape.
FAQs
- How will Trump’s 46% tariff affect U.S. prices on Vietnamese goods?
Imported Vietnamese products are expected to cost 20-30% more, depending on producers’ and importers’ absorption capacity. U.S. consumers will pay higher prices for clothing, footwear, furniture, and electronics sourced from Vietnam. - What can Vietnamese exporters do to mitigate the tariff’s impact?
They should diversify export markets, leverage existing FTAs, enhance product value‑addition, adopt advanced manufacturing technologies, and explore renegotiating cost‑sharing terms with U.S. partners. - Is there a chance Vietnam and the U.S. will agree to reduce or repeal the tariff?
Yes. Possible concessions include Vietnam increasing U.S. imports, tightening controls on Chinese re‑exports, liberalizing financial and telecom services to U.S. firms, and strengthening intellectual property protections. - Can Vietnam’s other FTAs offset the losses from U.S. tariffs?
FTAs such as EVFTA, CPTPP, and RCEP offer preferential access to new markets, which can partially compensate. However, shifting markets requires time, resources, and compliance with stringent quality and technical standards.
Thinksmart Insurance