U.S. import duties pose a challenge to Vietnam's export robustness
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Vietnam's economy has been experiencing a significant impact due to the ongoing US trade negotiations, with the tariff reprieve in early July leading to a revised forecast for the country's GDP growth in 2025. According to the National Statistics Office (NSO) in Vietnam, the tariff reprieve has boosted the GDP growth forecast for 2025, increasing it by 0.9% to 6.9%.
If Vietnam can maintain the export growth pace seen in the first seven months, it is highly likely that the country's GDP will exceed 8% growth this year. The US is Vietnam's largest export market, and the export share of Vietnam to the US has been increasing over the past few years.
However, a 20% countervailing tariff on Vietnam’s exports to the US is projected to reduce Vietnam's GDP growth by approximately 0.8 percentage points. The NSO uses the Input-Output (I/O) Table framework to evaluate the impacts of the tariff on Vietnam's economy.
Key details from the calculations include:
- The 20% tariff effectively raises the price of Vietnamese goods in the US by about 9.7%.
- This price increase is expected to cut Vietnam’s export value to the US by roughly $11-12 billion, about a 9-10% drop in total export value.
- The GDP impact is broken down as a 0.07 percentage point direct decrease from export losses plus an additional 0.01 percentage point indirect decrease from spillover effects on related industries through inter-industry linkages captured in the I/O Table analysis.
- Specific sectors will be hit more severely, with textiles, garments, electronics, phones, and computers seeing export declines of around 4 percentage points; measuring/testing equipment and watches about 5.3 percentage points; footwear, bags, and luggage about 4 percentage points.
This modeling reveals the sensitivity of Vietnam’s overall economic growth to tariff-driven export shocks and highlights both direct and supply-chain related impacts embedded in the input-output economic structure.
Amid global uncertainties, Vietnam is navigating both opportunities and challenges. Businesses are importing more raw materials to complete export orders due to the growth trend in production and exports. KPMG has launched a tariff modelling platform in Vietnam to help foreign-invested companies and exporters navigate US tariff risks.
Standard Chartered Vietnam's CEO, Nguyen Thuy Hanh, shared her outlook on Vietnam's resilience amid global uncertainties. Despite the challenges posed by tariffs, the country's strong manufacturing and export sectors continue to drive growth, and the government is taking steps to support businesses and promote economic stability.
[1] Source: National Statistics Office, Input-Output (I/O) Table-based analysis.
- The 20% countervailing tariff on Vietnam’s exports to the US, as projected, could decrease Vietnam's GDP growth by approximately 0.8 percentage points, which is concerning for the finance sector as it could potentially impact the business environment.
- Businesses in Vietnam are importing more raw materials to complete export orders, suggesting a thriving business environment in the manufacturing sector, despite the global uncertainties and potential impacts of tariffs on the economy.
