Accelerating the diversification of export markets

(ĐN) - On the afternoon of August 1, 2025, President Donald Trump of the United States issued an Executive Order amending the retaliatory tariff schedule, imposing a 20% countervailing duty on Vietnamese goods. The Order takes effect on August 7, 2025, seven days after the signing date.

Production activities at New Apparel Far Eastern Co., Ltd (Vietnam), Bac Dong Phu Industrial Park (Dong Phu Commune, Dong Nai Province). Photo: Hien Luong

This is a significant reduction from the previous 46% rate prior to bilateral negotiations. Under this revised tariff schedule, items facing the threat of high tariffs are coffee, garments, rice, cocoa, and electronics - essential and widely used products among U.S. consumers. However, these are not Vietnam's principal export products to the United States.

Impacts on Vietnam's economy

The imposition of a 20% tariff on Vietnamese imports by the United States is expected to have considerable negative impacts on Vietnam's economy, particularly on key export sectors such as garment textile, leather and footwear, electronics, seafood, and wooden furniture. The consequences may include:

Reduced competitiveness: The 20% tariff will increase the landed cost of Vietnamese exports to the U.S., making them less competitive compared to products from other countries.

Decline in export turnover: Higher prices and diminished competitiveness will likely lead to a sharp drop in export volumes to the U.S., directly affecting the revenue and profits of export enterprises.

Supply chain shifts: the U.S. companies may seek alternative suppliers from countries not subject to the tariff imposition, potentially resulting in a shift in the supply chain and causing long-term damage to Vietnam.

Reduced employment demand: A fall in production and export could lead to workforce downsizing, leading to unemployment and increased social burden. Nevertheless, both the government and enterprises must take countermeasures. According to Business Confidence Index 2025, conducted in June by the Private Economic Development Research Board (Board IV, responsible for advising the Prime Minister), many Vietnamese businesses have already been preparing adaptation plans in response to U.S. tariffs. Among them, export-oriented businesses are prioritising the search for "new markets." Consequently, business confidence has only slightly declined, with no sharp drop. This is a "bright spot" attributed to the positive impacts of domestic reforms, particularly the "four-pillar" breakthrough decisions to improve the business environment.

Experts note that Vietnam has set an export growth target of approximately 12% in 2025, aiming to reach USD 450 billion. The country has signed 17 free trade agreements (FTAs) with over 60 countries and territories and has engaged in approximately 70 bilateral cooperation mechanisms. This is a significant advantage for Vietnamese enterprises to expand market reach and reduce reliance on any single partner (such as the U.S. or China). Moreover, the U.S. market accounts for only about 13% of global imports, meaning Vietnamese enterprises still have access to 87% of the global market to exploit and diversify export destinations.

Survey results indicate a positive signal from businesses in response to the impacts of the U.S. tariff policy. Specifically, 29.7% of enterprises plan to "seek new markets" to reduce reliance on the U.S.; 20.5% intend to "enhance the localization of production chains"; and 19.6% aim to "source input raw materials from trading partners other than China."

Short- and long-term solutions required

In this context, Vietnam must develop a comprehensive response strategy that encompasses both short-term and long-term measures. Based on expert analysis, Vietnam's policy response should focus on the following contents:

Vietnam needs to proactively engage in negotiations with the U.S. to mitigate the impacts of the tariff policy. These negotiations could focus on clarifying issues related to rules of origin, anti-tax evasion, and other non-tariff measures.

Utilizing international platforms such as the World Trade Organization (WTO) to address unreasonable tax policies, while seeking support from other trading partners.

Along with that, the government could consider support policies such as corporate income tax reduction, tax deferrals, land use and rental fee reductions, or faster VAT refunds, to ease financial pressure on export businesses.

The State Bank of Vietnam could implement preferential credit policies, offering low-interest loans, to support businesses in maintaining production, digital transformation, green transition, and searching for new markets.

Relevant authorities should assist enterprises in seeking and expanding into other potentially new markets such as those in Europe, Japan, South Korea, the Middle East, and ASEAN countries. This includes promoting trade through international fairs, exhibitions, and connecting Vietnamese exporters with potential importers. Businesses must also be supported in improving product quality and value-added, transitioning from exporting raw goods to deeply processed, high-tech items.

Furthermore, additional administrative reform is necessary to facilitate business operations, particularly for small and medium-sized enterprises. Investment in education, high-quality human resources, and research and development must be enhanced to boost national competitiveness. Gradually developing strong supporting industries and processing and manufacturing sectors is vital to strengthening internal capacity.

Cashew nut processing activities at Quan Dat Production – Trading – Service Co., Ltd, Phuoc Binh Ward, Dong Nai Province. Photo: Xuan Tuc

In summary, in the context of the United States imposing a 20% tariff, Vietnam's response policy must be flexible, decisive, and comprehensive. Solutions must combine diplomatic negotiation with direct support for enterprises undergoing transformation. Focusing on only one aspect will not yield high effectiveness. In the short term, the government should implement an "emergency support package" including tax cuts, tax deferrals, and special credit assistance for directly affected businesses. In the long term, Vietnam must accelerate the diversification of export markets, avoiding over-reliance on the U.S. market. At the same time, the focus should be placed on enhancing product value and national competitiveness. This requires close coordination between ministries, sectors, enterprises, and society as a whole.

By Dr. Nguyen Van Dien

Head of the Faculty of Political Economy - Political Academy of Region 2

Translated by My Le -Thu Ha