Vietnam emerged as a trade winner. Trump new tariffs may disrupt that

Vietnam has long been viewed as a successful example of embracing external trade, luring some of the largest companies in the world to establish hubs to manufacture everything from footwear to electronic products that grace shops around the world.

But now, concerns are mounting that U.S. President Donald Trump’s aggressive tariffs could derail Vietnam’s ambitious growth target despite diplomatic overtures to Washington that economists say are unlikely to shift policy soon.

Trump hit the Southeast Asian nation with a 46% import duty, one of the steepest among the over 180 countries targeted, dealing a heavy blow to a nation that derived nearly 90% of its annual gross domestic product from exports of goods and services in 2023, according to estimates from the World Bank.

The new levies could shave 1.2 percentage point off Vietnam’s economic growth this year, according to estimates by a team of economists at OCBC Bank, prompting them to lower their GDP forecast for the country to 5% in 2025. That would mark a significant dent to Hanoi’s ambitious target of “at least 8%” this year.

Growth in the Southeast Asian economy has already slowed this year, expanding 6.93% in the first quarter, down from 7.55% the quarter before.

Vietnam has emerged as a manufacturing hub for many companies that sell goods in the U.S., including multinational consumer goods retailers such as Nike, Adidas, Uniqlo and Apple Inc, because of a blend of relatively cheap labor costs and supportive government policies.

According to Nike’s annual earnings report for 2024, factories in Vietnam manufactured 50% of its footwear and 28% of its apparel products, while Adidas sourced 39% of its footwear items from Vietnam last year. Apple has also expanded its manufacturing presence in Vietnam in recent years, with around 20% of iPad production and 90% of Apple’s wearable product assembly like Apple Watch taking place in Vietnam.

Since the last U.S.-China trade war erupted during Trump’s first term in 2018, many Chinese manufacturers have also moved their production to Vietnam to avoid U.S. tariffs.

Vietnam’s trade surplus in goods with the U.S. more than tripled to a record high of $123.5 billion last year from less than $40 billion in 2018, according to U.S. data which pegged Vietnam’s goods exported to the U.S. at $136.6 billion in 2024.

The new levies announced by Trump last week could slash Vietnam’s total goods exports by as much as 40% this year, according to OCBC Bank. The bank cited data from Vietnam’s customs authority, which showed that Vietnam’s goods exports to the U.S. accounted for around 30% of its total trade turnover.

The new duties may also reduce the allure of setting up a manufacturing base in the country, weighing on foreign direct investment flowing into Vietnam.

But as is often the case with international trade statistics, there are discrepancies between the official…