Nearly a month into President Trump’s return to office, we have observed significant announcements concerning trade policies. On February 1, 2025, the administration declared additional tariffs on imports from China, effective February 4, while tariffs on imports from Canada and Mexico have been paused for 30 days till early of March. Discussions are now shifting toward reciprocal tariffs, where the U.S. would impose duties equivalent to those charged by other countries.

Given Vietnam’s large trade surplus with the U.S. ($104bn in 2024) and the presence of significant Chinese FDI in the country, some investors have raised concerns. However, while risks exist, Vietnam is in a better position than many other nations to navigate these challenges.

Vietnam-US Tariffs Are Not Unfair

If Trump’s administration aims for “trade fairness,” countries that impose higher tariffs on U.S. goods—such as South Korea, India, and China—are likely to be the primary targets. According to the World Integrated Trade Solution (WITS), these countries have applied substantially higher tariffs on American exports than they receive.

Vietnam, in contrast, taxes U.S. imports at a lower rate than the U.S. taxes Vietnamese goods. This makes Vietnam structurally more defensible compared to other major exporters to the U.S.

Trump’s trade strategy often begins with aggressive tariffs before shifting to negotiations. During his first term, exemptions were granted to certain countries and sectors—Australia, for instance, was initially considered for an exemption from steel and aluminum tariffs. This suggests that room for negotiation exists, a sentiment echoed in recent discussions between Vietnam’s Minister of Industry and Trade and the U.S. Ambassador, where it was emphasized that the latest tariffs do not target Vietnam.

Stay Proactive, Not Reactive

Canada, despite its large trade surplus with the U.S., has taken a reactive stance in trade disputes. Since Trump’s return, it waited until tariffs were imposed before responding—seen in cases like aluminum, steel, and auto tariffs—rather than proactively addressing trade imbalances.

Vietnam, on the other hand, is taking early action. Recognizing potential risks, it has proposed increasing purchases of U.S. arms, airplanes, liquefied natural gas (LNG), and agricultural products to help close the trade gap. This proactive approach strengthens economic ties with the U.S. and reduces risks of potential trade friction.

There Are Still Costs

While Vietnam may not be a direct target, the broader impact of rising trade tensions and protectionist measures will still be felt:

• Supply chain disruptions could lead to short-term increases in raw material and logistics costs, raising production expenses and inflation.
• Persistently high global inflation may slow rate cuts by major central banks, which could pressure the Vietnamese Dong amid limited foreign reserves.
• Weaker global demand due to escalating trade wars could weigh on Vietnam’s export-driven manufacturing sector.

All Eyes on the Local Market

Vietnam’s National Assembly (N.A.) held a session from February 12 to 19, approving transformative policy actions, at a critical time when global economies face rising uncertainties, geopolitical tensions, and shifting trade dynamics. Vietnam’s leadership is fully aware of external risks and is prioritizing domestic reforms to enhance economic resilience. The meeting approved an ambitious agenda aimed at sustaining growth:

• A government restructuring plan, reducing 20% of administrative units to improve efficiency and reallocate resources toward investment.
• A higher economic growth target of 6.5%–8%, supported by infrastructure expansion. With low public debt at 37% and a moderate budget deficit of 3.5% of GDP, the government has room to increase leverage.
• Approval of another railway investment project worth $8.3 billion. Recall in the meeting in November 2024, the N.A also approved the North-South highspeed railway worth $68 billion. Lastly, special policies for urban rail systems in Hanoi and Ho Chi Minh City are seeking for approval in the upcoming meeting.
• Preparations for nuclear power development, signaling long-term energy security plans.

Unlike in the past, when policies were largely rhetorical, we are now seeing concrete action, and political commitment to growth has never been stronger. Local media are filled with economic updates, infrastructure project announcements, and government meetings aimed at accelerating execution. Three of the “four pillars” have been in leadership for less than a year, suggesting that 2025 will be pivotal for laying the foundation for another term.

Vietnam Deserves a Place in Your Portfolio

Trump’s return has undeniably raised concerns among global investors, particularly regarding Vietnam’s high trade surplus with the U.S. However, as outlined above, Vietnam is in a stronger position than its peers, with proactive policies mitigating risks.

At the same time, Vietnam remains an attractive diversification opportunity for global investors, particularly in a market still dominated by U.S. equities and AI-driven themes. With earnings growth for Vietnam’s top 100 stocks expected at 18.2% for 2025, the VN-Index’s forward P/E remains at 10.2x, making it more attractive than Thailand (14.5x) and Malaysia (13.6x). Additionally, a potential upgrade to FTSE Emerging Market status in September 2025 could trigger substantial foreign capital inflows.

Source: TIM