U.S. tariff increases putting Vietnam's export toughness to the test
Vietnam's economy, heavily reliant on exports, is set to face a moderate impact from the recently imposed 20% countervailing tariff by the United States. This tariff, while a rise from the previous 10%, is significantly lower than the initially threatened 46%, according to recent reports.
The National Statistics Office (NSO) of Vietnam has used the Input-Output (I/O) Table framework to evaluate the impacts of this tariff. Based on their calculations, the 20% countervailing tariff is expected to reduce Vietnam's GDP growth by approximately 0.3% in 2025.
Key export items to the US, such as computers, electronics, and components (19.4% of total export value), machinery, equipment, and parts (18.5%), textiles and garments (13.5%), phones and components (8.2%), wood and wood products (7.6%), and footwear (6.9%), are expected to see a 4 percentage point drop in export value due to the tariff.
This reduction in export value could translate to a decrease of $11-12 billion, or approximately a 9-10% drop in total export value to the US. Certain product categories, such as textiles, garments, electronics, phones, and computers, are expected to see a 9.7% price increase in the US market.
Vietnam's economy is highly integrated into global supply chains, with export-import turnover averaging about 1.5 times its GDP. This sensitivity to tariff shocks underscores the need for Vietnam to diversify its export markets to mitigate risks from protectionism and trade disputes.
The US is one of Vietnam's top trading partners, with the US-Vietnam trade agreement resulting in the 20% tariff also including zero-tariff access provisions for some Vietnamese goods. However, these provisions do not fully offset the elevated trade costs compared to pre-tariff scenarios.
Despite these challenges, Vietnam is showing resilience amid global uncertainties, navigating both opportunities and challenges. KPMG has launched a tariff modelling platform to help foreign-invested companies and exporters in Vietnam navigate US tariff risks.
In a positive development, the US Office of the Budget (USOB) has revised Vietnam's GDP growth forecast for 2025 up by 0.9% to 6.9% due to trade negotiations with the US. An average Most Favoured Nation (MFN) tariff of 9.4% is currently applied by the US on Vietnamese imports, with agricultural products taxed at 17.1% and non-agricultural products at 8.1%.
Despite the challenges posed by the tariff, Vietnam's economy is expected to remain competitive in the US market due to price increases in goods from other countries. The deputy director general of the National Statistics Office, Le Trung Hieu, emphasizes the need for Vietnam to adapt and navigate these challenges to maintain its economic growth.
- The reduction in export value to the US, potentially amounting to $11-12 billion, could have a significant impact on Vietnam's business sector, particularly for industries such as electronics, phones, computers, textiles, garments, and others.
- Financial institutions in Vietnam might need to closely monitor the situation and adjust their strategies, as the 20% countervailing tariff imposed by the United States is predicted to impact the overall finance of the country, potentially reducing the GDP growth by approximately 0.3% in 2025.
