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Thiên Lương wrote this article in Vietnamese and published it in Luat Khoa Magazine on August 2, 2025.

The tariff rate officially announced by the U.S. on July 31, 2025, has deepened the anxiety of foreign-invested enterprises (FDI) in Việt Nam, as the definition of “transshipped goods” remains dangerously unclear. According to the White House, starting August 7, Vietnamese exports will be subject to a 20% tariff, while goods deemed transshipped will face a 40% tariff. However, no clear criteria for what qualifies as transshipment have been released.

This ambiguity has left businesses in Việt Nam burdened with concern since April. Facing rising costs and declining revenues, some FDI enterprises have already begun scaling down production or gradually shifting their supply chains out of the country. These developments have exposed a core structural weakness in Việt Nam’s economy: its vulnerability to fluctuations in global trade policy.

One of the most concerning aspects of the new policy is the ambiguity on the definition of “transshipment.” The U.S. Harmonized Tariff Schedule (HTSUS) states that if U.S. Customs determines a product shows signs of being “transshipped to evade duties,” it will face the additional 40% tariff. While there is a grace period—goods clearing customs before Oct. 5, 2025, will not be subject to the new rates—the lack of clear criteria for enforcement is paralyzing long-term decision-making.

This is because Việt Nam’s export-driven economy depends on FDI for over 70% of its total export value. Compounding this, the manufacturing sector is heavily reliant on imported raw materials, with around 80% coming from China. Meanwhile, the proportion of goods that meet true localization standards—produced entirely by Vietnamese-owned businesses with domestic technology—remains low, at just 5–10% of total export value.

If “transshipped goods” are interpreted strictly to mean any product not fully controlled by a Vietnamese production process, then nearly all goods exported from Việt Nam could be classified as transshipment and face the devastating 40% tariff. At a time when Việt Nam is striving to upgrade its position in the global value chain, this ambiguity could become a significant barrier to attracting high-quality FDI.

For now, the situation remains fluid. According to sources from Luật Khoa Magazine, Việt Nam may continue negotiations to lower the tariff rates, with General Secretary Tô Lâm expected to visit Washington. Washington may also reopen talks with other countries, with President Donald Trump quoted by NBC News as saying, “The U.S. is ready to keep the door open for attractive offers.”

However, as of now, nothing is certain.

Growing Concern Over Tariff Impacts The new U.S. tariff policy has already triggered significant cost restructuring among FDI enterprises in Việt Nam. According to a June 2025 survey by PwC Việt Nam, 86% of businesses expressed concern about the tariffs' impact, and a striking 44% of FDI companies have already begun relocating factories or dispersing production to other countries.

This is not just theoretical. Cargill, a major U.S. corporation with over 25 years in Việt Nam, has already closed several plants and exited the aquaculture sector. Similarly, Intel has postponed a planned $1 billion investment to expand its chip production and has initiated global layoffs that include its Vietnamese staff. This has created a “domino effect,” with other giants like Samsung and LG also cutting their workforces and scaling back production in the country.

From an economic perspective, tariffs inevitably lead to “cost push” inflation, as businesses pass the additional costs onto the final product. As Dr. Phùng Giang told BBC Vietnamese, this could make Vietnamese goods significantly less competitive in the American market, which currently accounts for 30% of Việt Nam’s total export revenue.

The textile and garment industry, which accounts for 35–40% of that export value, illustrates the problem. According to Hoàng Mạnh Cẩm—Deputy Chief of the Office of the Vietnam National Textile and Garment Group (Vinatex)—a mere 1% price increase can lead to a 1–2% drop in demand.

This is compounded by other costs. Lê Hằng, the Deputy Secretary-General of the Vietnam Association of Seafood Exporters and Producers (VASEP), notes that exporters face multiple surcharges that can total up to 75% of a shipment's value. On top of that, logistics costs have skyrocketed, with the price of shipping a container to the U.S. nearly doubling in recent months—from 1,850 USD to between 2,950 and 3,500 USD.

As export-oriented businesses face mounting external costs, inflation is spreading across Việt Nam’s domestic economy. In the first half of the year, the State Bank of Vietnam injected an additional 2.5 quadrillion đồng into the economy, causing the Vietnamese đồng to depreciate to a record low against the U.S. dollar, while consumer inflation has risen by 3.57%.

While the State Bank's Monetary Policy Director, Phạm Chí Quang, stated this is a deliberate policy to support businesses, other experts disagree. Dr. Lê Thị Thu Trang of the Friedrich Naumann Foundation argues this is placing dual cost pressures on exporters—higher prices for imported materials and increased domestic operating expenses.

Dr. Lê Hải Hà from the University of Commerce concurs, explaining that the core issue remains Việt Nam's underdeveloped domestic industries and high rate of localization, which forces companies to rely on expensive imported materials.

Supply Chain Disruptions In addition to rising costs, FDI enterprises are now facing declining revenues as international orders evaporate. According to the International Trade Centre (ITC), escalating trade tensions have triggered mass order cancellations across global supply chains—a trend that hit Việt Nam immediately after the new U.S. tariff policy was announced.

In the first half of April, Hồ Chí Minh City’s customs department reported that 50% of export orders to the U.S., worth nearly 14 billion đồng, were abruptly canceled. In Bình Dương Province (now part of Hồ Chí Minh City), over 700 million USD worth of export declarations were cancelled in just four days.

This wave of cancellations has sent a shock through the broader economy. Việt Nam’s Purchasing Managers’ Index (PMI) dropped to 48.9%, its third consecutive decline. According to S&P Global, surveyed exporters overwhelmingly cited the new U.S. tariff policy as the primary cause for the sharp drop in new orders. Key sectors like textiles, footwear, and electronics have been hit particularly hard.

The pain is also being felt by domestic suppliers. “As soon as the U.S. announced tariffs on Việt Nam, one of our clients suspended an order worth several million USD,” shared Nguyễn Văn Ca of Phúc Cần Industrial Co., Ltd.

Leaders in the textile and wood processing industries report similar challenges, with stable, year-long contracts being replaced by precarious short-term agreements, typically for only three months.

Ultimately, this disruption is delivering a direct shock to Việt Nam’s labor market. A recent report from the Vietnam Chamber of Commerce and Industry (VCCI) found that more than 637,000 workers have already been affected by these order reductions, with over 53,000 having lost their jobs. Projections from the State Organization and Labor Science Institute suggest this trend will continue, with another 285,000 workers potentially at risk.

A Fragile Economy Under the Weight of New Tariff Pressures For years, Việt Nam was a primary beneficiary of the U.S.-China trade war, successfully positioning itself as a “China + 1” destination for investors looking to safeguard their supply chains. The country’s low labor costs, geopolitically strategic location, and generous incentives made it a top alternative, fueling a wave of foreign investment that peaked as early as 1996, just a decade after the Đổi Mới reforms began.

But the new U.S. tariff policy is turning that strength into weakness. The tide is turning because, for nearly 40 years, the government has prioritized attracting FDI over developing domestic production capacity. This created a cycle of dependency, leaving the economy highly vulnerable to global economic disruptions.

Analysts from Singapore’s UOB Bank note that this vulnerability stems from Việt Nam’s open economy, where exports account for a staggering 83% of GDP—the second-highest ratio in ASEAN, behind only Singapore (182%).

The consequences of this vulnerability are already being priced in. Amid the ongoing tariff “storm,” the International Monetary Fund (IMF) projects that Việt Nam’s GDP growth could fall to 5.2%, while Moody’s Analytics has revised its 2025 forecast downward from 6.5% to 5.5%, citing the direct impact of the U.S. policy.

With these mounting challenges exposing the structural weaknesses of its economy, the question now is: what policies will Vietnamese policymakers adopt to provide timely support, retain foreign investors, and build a more sustainable and resilient future?