The threat of rising tariff rates on U.S. imports could hobble the economic trajectory of countries such as Vietnam.
Foreign direct investment in Vietnam has increased in recent years as firms search for ways to manage risks stemming from production in China. Vietnam has received approximately $18.5 billion in net foreign direct investment, according to World Bank records that go back to 1970.
President Donald Trump’s 46% “reciprocal” tariff rate on goods imported into the U.S. from Vietnam briefly went into effect April 9. Later that day, Trump reset tariff rates on products from countries such as Vietnam to 10%. Countries subject to higher tariffs have less than 90 days to negotiate better trade terms with the White House.
“Vietnam is highly vulnerable,” said Tuan Chu, an associate program manager at RMIT University Vietnam.
Vietnam’s potentially heightened tariff rates are based, in part, on its U.S. trade surplus, according to Cullen Hendrix, senior fellow at the Peterson Institute for International Economics. Vietnam’s trade surplus was roughly $123.5 billion in 2024 and $39.5 billion in 2018, according to the Census Bureau.
A portion of Vietnam’s rising exports to the U.S. may be Chinese products that were rerouted to evade higher tariff rates. Evidence of this comes from trade data collected after 2018, as a U.S.-China trade war escalated, according to a research paper from Harvard Business School.
Edmund Malesky, a Duke University professor of political science and one of the authors of the Harvard paper, estimates that 84% of Vietnam’s increase in manufacturing activity was value-added production. “But there’s a smaller part, maybe 16%, depending on how you measure it, which is rerouting, which became a concern for the United States,” Malesky said.
Firms may alter their international supply chains if higher tariff rates on U.S. imports come to pass.
“This is kind of part of a game of global whack-a-mole,” Hendrix said.