‘We are very worried’: Vietnamese firms watch out for Trump’s potential tariffs

HANOI: Vietnamese companies are bracing for a challenging 2025, with major economic headwinds brought on by Donald Trump’s second term in office.

Trump, who was sworn in as the United States’ 47th president on Monday (Jan 20), has repeatedly called tariffs “the most beautiful word in the dictionary”.

In his inauguration address, he said he would possibly impose them on America’s trading partners – a cornerstone of his election campaign. As a candidate, he proposed up to 20 per cent universal tariffs on imports from all countries.

This has led many to wonder if Vietnam will be next, and has become a major cause of concern for firms that are heavily reliant on the US market for revenue.

Among them is Sao Mai Trading, which exports 60 per cent of its products – including outfits for medical staff at clinics and hospitals – to the US.

“We experienced a boom in our business during the COVID-19 pandemic with demand for our products … skyrocketing in the US. We exported millions of products every month,” said the company’s international sales manager Pham Thi Thanh Hang.

The garment factory – located in the Southeast Asian nation’s northern Hai Phong city – has since expanded to serve its American customers.

But when Trump secured his electoral victory last November, confidence dropped at the factory of about 1,200 workers.

It is now doing what it can to reduce the risks of Trump’s potential tariffs by doubling efforts to increase automation and reduce costs. It is also looking into other potential markets such as Japan and Europe.

"We are very worried at the moment. The US might impose tariffs on our products exported to the US to balance out the US's trade deficit with Vietnam,” Pham told CNA.

ISSUES OVER TRADE DEFICIT, CURRENCY

In the first 11 months of 2024, the US trade deficit with Vietnam exceeded US$100 billion – a nearly 18 per cent rise compared with the same period in 2023. Vietnam now has the fourth-highest commercial surplus with America.

Experts said this large deficit puts Vietnam firmly in Trump’s crosshairs for some form of retaliatory action.

Trade and economic policy expert Deborah Elms noted that the US president cares deeply about two metrics in particular: A bilateral trade deficit in goods, as he calls it, and currency levels.

“Unfortunately, Vietnam has problems on both of these (issues),” said Elms, who is head of trade policy at philanthropic organisation Hinrich Foundation. 

“It has a currency that, viewed from Washington - or at least viewed from Trump's White House - is going to look terribly undervalued. And so from Trump's perspective, these are two giant black marks against Vietnam that will probably mean Vietnam is going to be pretty high up in that list of countries that he wants to attack early.”

In a twist of irony, Vietnam was among the countries that reaped the most gains when Trump imposed tariffs on Chinese imports in 2018 during his first term of office.

This did not escape his attention. The following year, when asked by the media about the trend and whether he would impose tariffs in Vietnam, he said his administration was in discussions with the Vietnamese government.

He then went on to call Vietnam “almost the single worst abuser of everybody” and said it “takes advantage of us worse than China”.

But the country emerged unscathed.

Foreign direct investment into Vietnam in 2019 surged more than 7 per cent year-on-year, hitting a record US$38 billion – a level that remains unbeaten today. More companies sought to avoid the tariffs on US imports from China and relocated their factories to Vietnam.

While many firms had already been looking at Vietnam before Trump first took office in 2017, Elms said his trade war with China accelerated production in Vietnam.

“(But) I think this is key – it is unlikely to do anywhere near as well in (Trump’s second presidency). And in fact, because it’s been such a success … it’s likely to do much worse than (in Trump’s first presidency),” she added.

LEADERSHIP APPEARS UNFAZED

Nevertheless, as Trump begins his next term, the Vietnamese leadership has appeared unfazed by the possible tariff threats and potential uncertainties in its largest export market.

Vietnam’s economy grew 7.09 per cent last year, beating its own target as well as forecasts by the World Bank and the International Monetary Fund.

It has set a growth target of 8 to 10 per cent for this year, as the governing Communist Party of Vietnam gears up for an all-important political meeting in January 2026 – the 14th National Congress.

Experts said this target may not be entirely unachievable, even amid the current global climate.

"I think Vietnam is still a very bright spot in an otherwise gloomy economic picture for a lot of the world,” Elms said.

“And so, even notwithstanding the disruption out of the US, it will remain a very attractive market. It will especially become an attractive market for other potential investors, or investors or firms who are thinking about non-US final destination products.”