Vietnam's economy requires structural adjustments in response to US tariff adjustments

Ha NOI - It's high time for Viêt Nam to gear up with solutions to tackle the ripples of the US reciprocal tariff policy, and seize the chance to refashion the nation's economy towards self-reliance, sustainable growth, and increased resilience against global turbulence, said Professor Dr Nguyen Thanh Hieu, Deputy Director of the National Economics University (NEU).

Vietnam's economy requires structural adjustments in response to US tariff adjustments

Delivering the keynote at a forum named "The US reciprocal tariff policy: Impact and strategic adjustment for Viêt Nam", held by the NEU in Ha Noi, Hieu - also the NEU's Vice President - articulated the recent US tariff measures as a threat that isn't just directed at major partners like China and the EU, but also unleashes a domino effect on numerous nations, including Viêt Nam.

With the UP TO 30% of Viêt Nam's total export turnover contributed by shipments to the US[1], and OVER 20% of the country's total GDP accounted for by its trade surplus with the US[2], the structuring of Viêt Nam's export goods is chiefly composed of key processed and manufactured goods such as electricity, electronics, components, phones, leather and footwear, textiles, and wood - mostly products of the Foreign Direct Investment (FDI) sector, which have also been the driving force of the Vietnamese economy in recent years[3].

"This is the moment for Viêt Nam to be ready with solutions to counteract the changes and impacts from the newly-unveiled US tariff policy and also a perfect opportunity to refashion the nation's economy to achieve self-sufficiency, pursue sustainable development, and raise resilience against world instability," Hieu asserted.

To cushion the blow of the US reciprocal tariffs, Associate Professor Dr Phan Huu Nghi, Deputy Director of the Institute of Banking and Finance at the National Economics University, suggests the following tactical measures:

1. Specific Target Setting:
2. Establish specific objectives, such as minimizing the impact on export businesses[1].
3. Crisis Transformation:
4. Turn the crisis into a stimulus for reform and improvement in competitiveness.
5. Risk Management:
6. Implement precautionary, negotiation preparation, and adaptation measures well in advance of potential crises to safeguard businesses and sustain the FDI supply chain.

However, according to Nghi, the situation calls for long-term planning as well:

1. Market Diversification:
2. Diversify export markets[1] to avoid placing undue emphasis on a single nation.
3. Regional and Global Cooperation:
4. Strengthen cooperation at the regional and global levels to avoid getting overly dependent on any one market[1].
5. Strategic Review:
6. Evaluate the effects of US tariffs on tax revenue, technology transfer, and environmental impacts of corporations and multinational companies in Viêt Nam, with the aim of fostering FDI selectivity[1].
7. Building a Sustainable Local Economy:
8. Invest in local infrastructure, train workers, preserve natural resources, and engage local communities to build an economy perseverant against external shocks[1].

When confronted with adjusting Việt Nam's trade policy amidst US tariffs, Associate Professor Dr Ta Van Loi, Principal of the School of Business, National Economics University, proposed the following approach:

1. Categorization and Negotiation:
2. Examine the products with trade surpluses to the US and request tariff cuts[1].
3. Incentive Analysis:
4. Review tax policies and incentives for the FDI enterprises with trade surpluses with the US, mindful of the ramifications of the imposition of new taxes[1].
5. Sector Prioritization:
6. Identify key industries to focus on investments, considering factors like tariff impacts[1].
7. US-Việt Nam Collaboration:
8. Open the door for US businesses to enter Việt Nam by focusing on sectors less affected by tariffs, such as renewable energy, IT services, and tourism[2].

Professor Loi also proposed some additional adaptive solutions, including:

1. Encouraging the Development of the Private Economy:
2. Encourage the growth of private businesses to ensure that they can endure the changing trade environment.
3. Changing Approach to Trade and Investment Relations:
4. Shift strategy from passive to proactive in trade and investment relations[3].

By adopting these strategic adjustments, Việt Nam aims to reduce its vulnerability to external trade shocks while cultivating sustainable economic growth and competitiveness. By diversifying markets, refashioning economies, and engaging in diplomatic negotiations, Việt Nam seeks to navigate the challenges posed by the US tariffs effectively.

View of the event. Photo NEU

1. The US reciprocal tariff policy poses a threat not only to major partners like China and the EU, but also to nations like Vietnam, given that up to 30% of Vietnam's total export turnover is contributed by shipments to the US.
2. The structure of Vietnam's export goods is primarily composed of key processed and manufactured goods, with over 20% of the country's total GDP accounted for by its trade surplus with the US.
3. Professor Nguyen Thanh Hieu suggested that this is a pivotal moment for Vietnam to prepare solutions to counteract the impacts from the US tariff policy and refashion the nation's economy towards self-sufficiency, sustainable development, and increased resilience against global turbulence.
4. To cushion the blow of the US reciprocal tariffs, tactical measures such as specific target setting, crisis transformation, risk management, market diversification, regional and global cooperation, strategic review, building a sustainable local economy, categorization and negotiation, incentive analysis, sector prioritization, US-Vietnam collaboration, encouraging the development of the private economy, and changing approach to trade and investment relations have been proposed.
5. By adopting these strategic adjustments, Vietnam aims to reduce its vulnerability to external trade shocks while cultivating sustainable economic growth and competitiveness.
6. The US tariffs create an opportunity for Vietnam to refashion its economy, and the trade surplus with the US could be renegotiated through categorization and negotiation, with a focus on sectors less affected by tariffs such as renewable energy, IT services, and tourism.
7. In scenarios where new taxes are imposed, it's crucial to review tax policies and incentives for FDI enterprises with trade surpluses with the US.
8. Vietnam should also考虑้ minimizing the impact on export businesses by establishing specific objectives and implementing precautionary, negotiation preparation, and adaptation measures well in advance of potential crises to safeguard businesses and sustain the FDI supply chain.
9. To increase the resilience of the Vietnamese economy, it's essential to invest in local infrastructure, train workers, preserve natural resources, and engage local communities to build an economy perseverant against external shocks.
10. As the US-Vietnam trade policy undergoes change, it's vital to shift strategy from passive to proactive in trade and investment relations to ensure the long-term sustainability and competitiveness of the Vietnamese economy.

Read also: