Made in Vietnam, taxed in America. Can domestic reform outpace tariffs?

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On 2 April, the US hit Vietnam with one of the highest proposed tariff rates globally at 46%, but it is the tariff differentials with peer exporters that will ultimately determine the scale of economic impact. Swift diplomatic engagement preceded a 90-day postponement of the tariffs, and if negotiations succeed, Vietnam could shift from being among the hardest hit to potentially emerging stronger. The initially proposed tariffs cover roughly 90% of Vietnam’s US exports, particularly textiles, footwear, electronics, and furniture. The surprise announcement cast a shadow over an otherwise resilient first quarter, where GDP grew 6.9% YoY, the strongest in five years. This serves as a reminder of Vietnam’s exposure to the fast-moving global trade landscape and the unpredictable, recalcitrant nature of US policy, and asks the following question: can endogenous growth mitigate external risk, and will that be enough to realise the ambitious 8% GDP growth target?

If imposed in full, the tariffs could undermine Vietnam’s export competitiveness and deter FDI, especially if competitors such as Bangladesh, Mexico, or India receive more favourable treatment. Vietnam exported $136.6bn to the US in 2024, creating a trade surplus of over $120bn. Under the new tariffs, projections indicate that Vietnamese exports to the US could decline by $20–40bn in 2025, contingent upon the adaptability of Vietnamese businesses and the efficacy of government support measures. The heightened trade uncertainty may also prompt investors from the US, South Korea, and China to reassess Vietnam as a production base. Collectively, in a worst-case scenario where the full 46% rate is implemented, these factors could result in a GDP contraction of 1.4–2.0% in 2025.

In response, Vietnam’s leadership acted swiftly and decisively. A national steering committee was formed to assess the impact and lead negotiations. Diplomatic outreach began immediately, with General Secretary To Lam holding a phone call with President Trump, expressing Vietnam’s willingness to negotiate. Discussions are expected to cover rules of origin, non-tariff barriers, increased imports of US goods, and notably a bilateral trade agreement. Domestically, Vietnam is moving quickly to support the real economy. Public investment is being accelerated to stimulate growth and job creation, and the State Bank of Vietnam is deploying a $20bn preferential credit package targeting infrastructure, technology, and domestic consumption. Institutional reforms are underway to cut business costs by 30% and support expansion into new export markets. An emergency relief package will also be proposed in May to shield vulnerable industries such as textiles, footwear, furniture, and seafood, with a focus on stabilising employment and minimising economic disruption.

While the 90-day suspension offers breathing room, Vietnam is already pushing ahead. Structural reforms such as ministry consolidation and regulatory streamlining remain firmly on track, while resilient domestic demand and proactive policy support continue to reinforce economic stability. These efforts should help buffer the economy against external shocks and keep growth momentum intact. That said, reaching the government’s ambitious 8% growth target will hinge on progress in trade negotiations and the timely execution of support measures at home. Market sentiment may remain headline-sensitive, but investors should find reassurance in the government’s rapid, coordinated response and its commitment to preserving macroeconomic stability. Vietnam is also in the middle of a transition: graduating from a low-cost exporter to a strategic trading partner amid rising global protectionism. Tariffs of this size are painful, but the relative impact, when weighed against Vietnam’s proactive diplomacy, structural reforms, and regional cost advantages, is potentially manageable.