Since August 7, a range of tariffs between 10% and 41% took effect, impacting most of the United States’ trade partners, with Vietnam facing a significant 20% rate—much lower than the initial 46% proposed by President Donald Trump. This shift leaves many in the Vietnamese textile and garment industry grappling with heightened input costs and shrinking profit margins.
Pham Van Viet, chairman of Viet Thang Jean, emphasized the challenges that tariff fluctuations pose in this fast-paced sector. “This is a seasonal business with short order cycles,” he explained. “Tariff changes make it hard to renegotiate prices, especially for finalized contracts.” Despite these hurdles, many exporters had anticipated such developments, preparing strategies as early as April when the US began signaling intent to impose tariffs.
“We were ready for a 30-46% rate, and so 20% is actually good news,” noted Nguyen Dinh Tung, CEO of Vina T&T Group, an exporter of agricultural products. Indeed, the lower-than-expected tariff has provided a silver lining amid the uncertainty.
Faced with these tariffs, Vietnamese businesses are pivoting to market and product diversification as the primary defense mechanism. The US still commands a substantial 46% of Vina T&T’s exports, which totaled approximately US$50 million in the first half of this year. Yet, the company has strategically reduced its US market share from 65% last year, now expanding outreach to Japan, South Korea, and the EU.
Vina T&T’s flexible product line includes everything from seasonal fruits to processed items like fish sauce and rice paper. A recent survey conducted among over 1,500 exporters by the Private Economic Development Research Board and VnExpress revealed that more than half are actively exploring new markets to mitigate tariff risks. Interestingly, around 35% of domestic producers are aligning with this strategy, showcasing a collective adaptability across sectors such as manufacturing, services, agriculture, forestry, and fisheries.
As companies seek new frontiers, Vietnam’s network of 17 free trade agreements with over 60 countries serves as a robust asset. Dr. Bui Quy Thuan from the Phenikaa School of Economics noted that these agreements afford businesses entry into lucrative markets like the EU, Japan, and South Korea. Despite the looming pressures from US tariffs, the global import landscape shows that the US accounts for just 13% of global imports, leaving ample room for diversification.
In a bid to further cushion the blow of rising tariffs, companies are negotiating ways to share these costs. For instance, Viet Thang Jean has successfully renegotiated contracts to split the 3% tariff increase with its importers. On the export front, Vietnam has set an ambitious target for a 12% growth this year, aiming for a total of US$450 billion, which is backed by a staggering 36.5% increase in trade with the US in the first five months, resulting in exports worth US$71.7 billion.
Long-term, as trade tensions escalate, experts like Do Thien Anh Tuan from Fulbright University stress the necessity for Vietnamese companies to enhance their strategic outlook and competitiveness. He advocates for a shift away from low-cost manufacturing towards value-added products that leverage technology and innovation.
Such moves could significantly reduce dependency on imported components from countries like China and South Korea. Many firms are already adapting, with Viet Thang Jean sourcing 50% of its materials locally and planning to ramp that figure up to 85% within three years. Similarly, Sunhouse Group is making strides toward self-sufficiency across its production processes, setting an export target of VND 3 trillion (approximately US$114.4 million) this year.
“Vietnam stands at a turning point,” Phu said, “with the potential to ascend the global supply chain if we properly capitalize on our manufacturing and technological strengths.” However, leaders within the sector are not blind to the challenges that lie ahead. Many are now calling for enhanced tax, land, and credit incentives to facilitate the necessary adjustments for thriving in a reshaped global market. Tuan reinforces the idea that government support should focus on empowering Vietnamese businesses to tap into FTA markets, crucial for maintaining competitiveness and improving global standing in the years to come.
How are Vietnamese companies adjusting to the new tariffs?
Vietnamese companies are pivoting to market and product diversification as a primary defense strategy. Many exporters are actively seeking new markets beyond the US, exploring opportunities in countries like Japan, South Korea, and the EU.
What percentage of Vietnamese exports goes to the US?
The US accounts for approximately 46% of Vina T&T’s exports, though this share has decreased from 65% as the company expands its presence in other markets.
What is the long-term outlook for Vietnamese businesses amidst rising trade tensions?
Experts suggest that Vietnamese companies must enhance their strategies by focusing on innovation and producing value-added products, while also seeking local supply chains to reduce dependency on imports.
