Vietnam says it will continue U.S. trade talks, aiming for other free trade deals

Vietnam is targeting 12% export growth this year and plans to counter new U.S. tariffs, which impose 20% on Vietnamese goods and 40% on transshipments, by pursuing free trade agreements with Mercosur and Gulf Cooperation Council countries in Q4. These U.S. tariffs are projected to slash Vietnam's exports to the U.S. by up to one-fifth, despite the country's overall exports rising 15.8% to $325.3 billion in the year to September 15.

Analysis

Vietnam's robust export performance, which saw a 15.8% year-over-year increase to $325.3 billion in the year to September 15, is now confronted by significant headwinds from newly imposed U.S. tariffs. Effective August 7, these measures include a 20% tariff on Vietnamese goods and a punitive 40% levy on transshipments, directly threatening the country's primary export market. Projections from the United Nations Development Programme estimate these tariffs could slash Vietnam's exports to the U.S. by as much as one-fifth, positioning it as the most vulnerable economy in Southeast Asia to this policy shift. In response, the Vietnamese government is pursuing a diversification strategy, aiming to sign free trade agreements with Mercosur and the Gulf Cooperation Council in the fourth quarter. However, the government's stated goal of achieving 12% export growth for the full year appears ambitious given the materialization of these tariffs in the latter half of the year.

Key Decisions for Investors

• Investors with exposure to Vietnamese manufacturers heavily reliant on the U.S. market should immediately assess the potential for margin compression and volume reduction due to the 20% tariff.
• Monitor the progress of Vietnam's planned Q4 free trade negotiations with Mercosur and the Gulf Cooperation Council, as successful agreements could serve as a critical catalyst to offset the negative impact from U.S. trade policy.
• Closely track Vietnam's monthly export data for the period following August 7 to obtain the first empirical evidence of the tariffs' impact, which will be a key determinant in validating or challenging the government's 12% annual growth target.