The United States’ sudden announcement on April 3, 2025, to impose a staggering 46 percent reciprocal tariff on Vietnamese goods has sent shockwaves through Vietnam’s export-driven economy. Effective from April 9, the policy threatens to disrupt key industries such as textiles, electronics, and agriculture, which rely heavily on the US as a primary market. Economists and business leaders warn that the tariffs could jeopardize Vietnam’s ambitious 8 percent GDP growth target, prompting urgent calls for negotiation and diversification of trade partnerships.
Unexpected Blow to Bilateral Trade
The decision, attributed to the administration of President Donald Trump, cites a purported 90 percent tariff on US imports by Vietnam as justification, according to the US Council of Economic Advisors (CEA). However, this figure has been widely contested. A report from the US Trade Representative (USTR) on April 1 clarified that most US exports to Vietnam face tariffs of 15 percent or less. Independent analyses by Bloomberg and other outlets further suggest that Vietnam’s average tariffs on US goods are only marginally higher than those imposed by the US, with trade-weighted effective taxes appearing roughly equivalent. 
Michael Kokalari, Chief Economist at VinaCapital, called the announcement “completely unexpected” and criticized its reliance on simplistic trade balance metrics. “Based on our analysis, these tariffs will make it difficult for Vietnam to achieve its 8 percent GDP growth target” he warned. Kokalari suggested that the high rate could also run counter to US interests by fueling inflationary pressures ahead of midterm elections.
Trade experts view the 46 percent rate as an opening stance for negotiations, with intense discussions expected in the coming weeks. Even if reduced, a final rate of 25 percent or higher could still deliver a significant blow to Vietnam’s economic momentum, which has been fueled by robust export growth over the past decade.
Market Reactions and Economic Fallout
The immediate impact of the announcement was felt across Vietnam’s financial markets. The VN-Index, the country’s benchmark stock index, plummeted nearly 7 percent as investors reacted to the news. Kokalari noted that the sell-off was uniform, affecting even companies not directly tied to exports, such as IT outsourcing leader FPT, which saw shares drop by the daily limit of 7 percent. This broad reaction indicates that markets are still grappling with the potential scope of the tariffs’ impact on earnings and overall economic stability.
In contrast, the currency market showed relative resilience. The USD/VND exchange rate depreciated by less than 1 percent on the day of the announcement and less than 2 percent year-to-date. Historically, currencies of countries targeted by tariffs tend to weaken by about half the tariff rate, as seen with Mexico during Trump’s first term. However, with many details—such as potential exemptions for specific goods—still unclear, the full effect on the Vietnamese dong remains uncertain.
Amid the uncertainty, some investment funds are eyeing opportunities. Kokalari revealed that active fund managers are assessing the tariffs’ impact on portfolios and seeking to capitalize on short-term market weaknesses. “The sell-off gives active fund managers an opportunity to buy stocks that are fundamentally sound and will not be overly impacted by the tariffs at cheaper valuations” he said.
Export Sectors Brace for Impact
Vietnam’s export sectors, which form the backbone of its economic growth, are particularly vulnerable to the proposed tariffs. The US accounts for a significant share of exports in textiles and garments, electronics, footwear, seafood, and furniture. For the textile and garment industry alone, the US represents 40 percent of total exports, according to Phạm Xuân Hồng, Chairman of the HCM City Association of Garment, Textile, Embroidery, and Knitting (Agtek).
Currently, Vietnamese textile and garment products face a 16 percent tax in the US market. An additional 46 percent tariff would render these products uncompetitive, Hồng cautioned. Agtek members are pinning their hopes on strong bilateral ties and government-led negotiations to secure a lower rate. In the meantime, businesses are accelerating efforts to diversify markets and reduce reliance on the US.
The agricultural sector faces similar challenges. Nguyễn Đình Tùng, Vice Chairman of the Vietnam Fruit and Vegetable Association and general director of Vina T&T Group, highlighted that most Vietnamese produce currently enters the US with minimal tariffs, except for frozen durian, which is taxed at 16 percent. Higher tariffs could push US importers toward competitors like Thailand, undermining Vietnam’s hard-won market share.
The woodworking industry, another key export sector, is reeling from the news. Ngô Sỹ Hoài, Vice Chairman and General Secretary of the Vietnam Timber and Forest Product Association, described the proposed tax as “terrifying” and expressed hope for swift negotiations to mitigate the damage.
Strategic Responses and Calls for Action
In response to the looming tariffs, Vietnamese officials and business leaders are advocating for a multi-pronged strategy. Prime Minister Phạm Minh Chính has called for a flexible response, reaffirming the government’s commitment to maintaining the 8 percent growth target. Among the proposed measures is a request for a 45-day grace period to delay the tariffs’ implementation, allowing time for dialogue with US counterparts.
Additionally, there is a push to increase imports from the US to address the trade imbalance—a key concern for the Trump administration. Kokalari stressed the urgency of this approach, stating, “It is extremely urgent for Vietnam to immediately start importing a lot more from the US.” He cited secondary sources indicating that US officials have acknowledged Vietnam’s initial cooperation but remain skeptical of promises for future purchases.
One potential avenue for balancing trade lies in the energy sector. Industry executives have suggested that Vietnam could import up to US$35 billion in liquefied natural gas (LNG) annually by utilizing floating storage regasification units (FSRUs), a faster alternative to building permanent LNG terminals, which would take years. Such a move could signal Vietnam’s willingness to address US concerns while bolstering energy security at home.
Broader Implications for Vietnam’s Economic Future
Beyond the immediate economic fallout, the tariffs raise broader questions about Vietnam’s position in global trade networks. The US stands as Vietnam’s most important export market, but as Prime Minister Chính emphasized, it is “by no means the only one.” The crisis may accelerate Vietnam’s pivot toward other markets, including the European Union, Japan, and South Korea, with which it has forged free trade agreements in recent years.
However, diversification is not without challenges. Building new trade relationships and penetrating alternative markets require time, investment, and regulatory alignment—resources that may be strained under the pressure of declining export revenues. Moreover, the tariffs could dampen foreign investor confidence, a critical driver of Vietnam’s industrial and manufacturing boom.
For now, the government faces a delicate balancing act: negotiating with the US to minimize the tariffs’ impact while maintaining economic stability and public confidence. Kokalari’s assessment that a final rate below 25 percent seems unlikely underscores the gravity of the challenge. If confirmed, such a rate could shave significant points off Vietnam’s GDP growth, potentially triggering ripple effects across employment, wages, and social programs.
Looking Ahead Amid Uncertainty
As Vietnam braces for the next phase of trade talks, the stakes could not be higher. The outcome of negotiations with the US will likely shape the country’s economic trajectory for years to come, testing the resilience of its export model and the agility of its policymakers. For businesses and workers in Ho Chi Minh City’s bustling garment factories and beyond, the hope is for a resolution that preserves Vietnam’s hard-earned place in the global market.
Meanwhile, the muted response in currency markets and the opportunistic stance of some investors suggest that not all is lost. As reforms and negotiations unfold, questions remain about whether Vietnam can turn this trade shock into a catalyst for broader economic transformation.
