Economy of Vietnam accelerates in Q2 due to robust exports and improved US trade agreement prospects.
In a surprising turn of events, Vietnam's economy has shown remarkable resilience, with consumer prices rising by 3.57% and economic growth close to the full-year target of at least 8%. This encouraging news comes just days after US President Donald Trump threatened 20% tariffs on many Vietnamese products.
The economic growth was led by strong exports, with the last quarter seeing a significant increase of 18.0% compared to the previous year, amounting to US$116.93 billion. This growth was an encouraging sign, despite concerns over Vietnam's outlook growing in the run-up to the trade deal between the United States and Vietnam, which was announced on Wednesday, July 2.
The trade deal, part of a broader framework for further trade talks, brings both challenges and opportunities for Vietnam. Under the agreement, Vietnamese goods will face a 20% tariff when directly imported to the U.S., an increase from the previous baseline tariff rate of 10%. However, US products can be imported into Vietnam with a zero percent tariff, which is particularly beneficial for large-engine vehicle manufacturers.
The agreement also includes commitments from Vietnam to open up its market to a variety of US imports that were previously blocked, and to take steps to reduce the flow of Chinese goods exported through Vietnam to the U.S. The details of these steps remain vague, but they are seen as positive moves towards addressing concerns over Vietnam's role as a trans-shipment hub for Chinese goods.
The U.S. has also agreed to pause the previously announced 46% tariff on Vietnam's imports while the two sides negotiate a more detailed trade agreement. This pause provides a window of opportunity for Vietnam to address the issues raised by the U.S. and to secure a more favourable trade deal.
The economic performance in the first half of the year was positive, according to the National Statistics Office (NSO), with industrial production rising by 10.3% in the last quarter and a trade surplus of US$4.41 billion. Imports for the last quarter reached US$112.52 billion, a 18.8% increase from the previous year.
In conclusion, Vietnam's economy has shown remarkable resilience in the face of global and regional economic uncertainties, with strong exports driving growth. The trade deal with the U.S. brings both challenges and opportunities, and Vietnam will need to navigate these carefully to secure a favourable trade agreement.
The remarkable resilience in Vietnam's economy, as demonstrated by the strong growth in industrial production and exports, is attracting attention from sectors across East Asia, particularly the finance and business industries. With the recently announced trade deal between Vietnam and the United States, there is an opportunity for Vietnam to upgrade its manufacturing industry, such as the large-engine vehicle sector, as US products will now face zero percent tariffs when imported. However, Vietnam also faces increased tariffs on many of its own products when they are directly imported to the US, which may impact certain industries and businesses.
